Simply, it's an unregulated digital or electronic form of money or currency. You may have heard it called "cryptocurrency". Each coin is unique and monitored. Owners of bitcoins can trade with them online. Everytime they are used, they are watched and the transaction recorded. That doesn't mean the person using it is recorded, but the transaction is. That transaction is available online in the form of an online ledger. So, in short, it's individualized electronic monitored money.
Still confused? So am I. Anyhow...
Here are some things you should know about this evolving economic trend of bitcoin for Real Estate:
1) "The currency may be used to disguise the source of money derived from criminal activities--commonly known as money laundering," writes the Real Estate Council of British Columbia in a recent newsletter.
2) Bitcoin can be used to legally purchase real estate, but cannot be used (in British Columbia) as a part of a deposit. A deposit is held in trust, and since bitcoin is not regulated by banks and governmental controls, it's not considered a trust.
3) The source of the payment might not be discoverable. This means nefarious forces can be at large in the purchase of certain assets. Therefore, selling a home or buying a home with bitcoin could potentially lead to investigative questions from higher authorities.
4) There are stories where people's identities have been stolen and title fraud. For example, someone steals someone's identity, the bad person advertises the property for sale online, it's paid for in bitcoins, the bad guy registers the title immediately, takes a loan out against the title, and buggers off. This, of course, ends up leaving the true owner left with the debt.
5) Other scammers have swiped photos and data from the MLS, posted it for sale (bitcoins only) on Craigslist. Bitcoins transacted, an unwitting person ends up with a whole chunk of nothing, and tragedy occurs.
In short, right now bitcoin is allowed for the purchase and sale of a home. BUT! It's highly adviseable that if you are considering a purchase or sale via bitcoin, that you first meet and discuss the situation with a lawyer who's fully informed about bitcoin and the legal risks. Then, and only then, proceed carefully.
Here's a video news story about the idea.