Bitcoin was conceptualised by Satoshi Nakamoto as a digital currency, which can be transferred across borders in a manner completely bypassing the current banking system. This has been a ground-breaking innovation. Bitcoins come into existence when they are 'mined' digitally, the mining process consisting of solving a complex Mathematical problem and the solution acknowledged by the community. Bitcoin mining requires the use of scarce resources, i.e., computing power. Miners are rewarded with freshly created bitcoin when they are successful in solving the math problem. The system is designed in such a way that there will never be more than 21 million bitcoins in existence, out of which 14 million bitcoins have been mined so far.
A currency is considered good only if it is accepted for exchange. Bitcoin is gradually gaining value because people have started accepting it in exchange for goods and services. Now many digital goods retailers accept bitcoin. There are some companies which offer bitcoin based credit cards.
Caution: Explosive. Handle with care.