Bit depth

Bit depth relates to how many bits of information there are per sample. In laymans terms this equates to how many levels of loudness a digital waveform can have. 16 bit has 65,536 possible levels of loudness while 24bit has 16,777,216 possible levels. 24bit is often used in recording as it has a much larger dynamic range/lower noise floor. This is not an issue for playback systems though, so 16 bit is perfectly acceptable there, eg. CD quality uses 16bit. 

Dynamic range diagram