Bywater was educated at the independent Nottingham High School and at Corpus Christi College, Cambridge.
In The Young Fogey Handbook (Poole, Dorset: Javelin Books, 1985), author Suzanne Lowry writes: "Michael Bywater, 30-year old Punch columnist and former trendy who once worked in films, made bold to criticise Burberrys for the inferior quality of their product - the trench coats are not what they were in the days of the trenches.
Burberrys riposted that indeed they could live up to their past, and made Bywater a coat to the 1915 design devised by Kitchener and Burberry – complete with camel hair lining to protect a gentleman officer's flesh on the field..."[citation needed] In the mid-1980s, Bywater co-designed and co-wrote several interactive fiction games.
He collaborated with Douglas Adams on Bureaucracy and the never-completed Milliways: The Restaurant At The End Of The Universe for Infocom, and with Anita Sinclair on Jinxter for Magnetic Scrolls.
He revisited computer games in the late 1990s as a member of the writing team on another Douglas Adams project, Starship Titanic.