The binary number system uses only two digits: 0 and 1. Each digit in a binary number represents a power of 2, starting from the rightmost digit, which is the least significant bit. For example, the binary number 0101 represents the decimal number 5 because it can be calculated as 0 \times 2^3 + 1 \times 2^2 + 0 \times 2^1 + 1 \times 2^0. In computing, binary is fundamental because it aligns with the on and off states of electronic circuits. Each binary digit, or bit, is the basic unit of data in computers. The combination of bits allows for the representation of more complex data, such as numbers, letters, and images, making binary essential for digital technology.