Bitcoin is rapidly gaining popularity, which has left people asking "What is Bitcoin?"

Bitcoin is a currency that was created in 2009. Transactions are made without a middle man, this means no banks. This means no transaction fees and no need to give your real name. More and more sellers and vendors are beginning to accept them: You can buy websites, and even every day things like pizza or manicures.

Of course, this has national governments in fits, as they currently can't tax and regulate Bitcoin transactions.

Bitcoin makes international payments easy and cheap because bitcoins are not tied to any country or subject to government regulation. This makes the value universal. Small businesses often like bitcoins because there are no credit card fees. Others just buy bitcoins as an investment, hoping that they’ll go up in value.

Because people are not named in transactions, only their wallet ID's, this is why bitcoins are becoming the choice currency for making illegal transactions such as buying drugs, etc.

Bitcoin users compete to “mine” bitcoins using computers to solve complex math puzzles. This is how bitcoins are created. A winner will be rewarded with 25 bitcoins around every 10 minutes.

Bitcoin has paved the way for other digital currencies, such as Dogecoin, who recently successfully sponsored a NASCAR stock car.

For a further explanation, this excerpt comes from Bitcoin's FAQ on their website.

From a user perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them. This is how Bitcoin works for most users.
Nobody owns the Bitcoin network much like no one owns the technology behind email. Bitcoin is controlled by all Bitcoin users around the world. While developers are improving the software, they can't force a change in the Bitcoin protocol because all users are free to choose what software and version they use.

via CNN Money and Bitcoin