Lumpy lawns are common in Colorado and are caused by earthworms and night crawlers. Earthworms in a lawn are a sign of healthy soil because they eat thatch, grass clippings and other organic matter, recycle nutrients and aerate the soil. This improves the health of the lawn. Since worms are good for a lawn, it is best to mow the lawn as high as the mower can be set and leave the worms alone.
However, worms build mounds of soil on the surface of the lawn, creating an uneven, bumpy surface. Aeration in the spring and fall, coupled with light rolling of the lawn, will help smooth the surface. A lawn roller is a machine with a weighted cylinder that rolls along the ground.
A light layering of compost or soil on the lawn from an adjacent flowerbed or vegetable garden can also be helpful.
For more information, see the following Colorado State University Extension fact sheet(s).