A bit is one binary digit. Because digital elements work on an on/off basis, binary (base two) arithmetic is the best way to model the value carried by each element. (In addition to on/off, other physical expressions of binary logic include such properties as magnetized/demagnetized, light/dark, high voltage/low voltage, loud/soft, etc.)
The bit is the protocol data unit at OSI layer one, the physical layer. Any transmission capture at layer one will reveal a bit stream. It is up to higher layer protocols to decode this bit stream and determine what it means.