What is a bit and how does it work?

Excuse me, could you please explain to me what a bit actually is and how does it operate within the realm of cryptocurrency and digital finance? I've heard the term frequently but I'm still a bit hazy on the specifics. Could you break it down in a way that's easy to understand for someone who's new to this field? I'm really curious to know how these fundamental building blocks contribute to the overall functioning of the cryptocurrency ecosystem.