In digital computers world bits are the smallest pieces of information that can be stored. One bit of information has a value of either “0″ or “1″. This values correspond with the two states of a switch: “on” and “off”. The electronic switches used in computers are called transistors.
In digital photography each pixel’s color is coded on a number of bits. For example if the color is coded on one bit, the pixel will be either black or white. A 2 bit image can have 2^2 = 4 tones: 00 (black), 01 (gray), 10 (gray), and 11 (white). An 8 bit image can have 2^8 = 256 tones ranging from 00000000 (0) to 11111111 (255). JPEG images are often referred to as 24 bit images because they can store up to 8 bits in each of the 3 color channels and therefore allow for 256 x 256 x 256 = 16.7 million colors.