bit v. byte

A bit (a contraction of ‘binary digit’), is the basic unit of digital information storage, indicating whether a device is on or off. A bit is usually represented as a 0 or a 1. A byte is a short sequence of bits used to encode a character of text, such as a letter or a number. Unless otherwise specified, a byte nearly always consists of 8 bits.

File sizes are usually expressed in bytes (or kilobytes, or megabytes, or gigabytes), but data transfer rates are often expressed in bits per second (or kbps, or mbps, or gbps).

wiseGEEK on bit v. byte

Wikipedia on binary prefixes