What Bitcoin is: An agreement amongst a community of people to use 21 million secure mathematical tokens--"bitcoins"--as money, like traditional African and Asian societies used the money cowry. Unlike the money cowry:
there will never be more bitcoins
they are impossible to counterfeit
they can be divided into as small of pieces as you want
and they can be transferred instantly across great distances via a digital connection such as the internet.
This is accomplished by the use of powerful cryptography many times stronger than that used by banks. Instead of simply being "sent" coins have to be cryptographically signed over from one entity to another, essentially putting a lock and key on each token so that bitcoins can be securely backed up in multiple places, and so that copying doesn't increase the amount you own.
https://bitcointalk.org/index.php?topic=7269.0
