Bitcoin is a digital currency, which means it does not have a physical representation like a dollar bill. Instead, Bitcoin is simply sent from individual to individual using digital wallets and is safe because of the security of a blockchain which approves the transaction and executes it.
There is no central bank or government creating its supply or controlling it.
Where does it come from? Think of gold and the mining process we use to extract it from the earth. The supply of the gold determines its value. Same with Bitcoin.
There are 21 million Bitcoins in total to be released on the internet with people and businesses running powerful computers to (decrypt) mine them. The amount of Bitcoin available to mine has been staggered over the years by the founders. This determines the value of Bitcoin. Supply and demand, the basics of economics.
16 Million Bitcoins have been decrypted (mined) to date and is in circulation which leaves a remainder of 5 million.
Computers mining the cryptocurrency can only ever decrypt 21 million Bitcoins.
As Bitcoins supply is slowing down this increases the demand.
All Bitcoins are encrypted for security, hence the term cryptocurrency, and the computers mining it solve complex mathematical equations to decrypt bits of the coins. These bits all have value as one Bitcoin can be divided up to one hundred million decimal places (0.00000001).
There is time, however limited, to invest in Bitcoin. By 2140 all 21 million Bitcoins will be in circulation.
As of 2014 the Bitcoin symbol is BTC like the dollar symbol is $