What is a 'Satoshi'?
A Satoshi is the smallest fraction of a Bitcoin that can currently be sent: 0.00000001 BTC, that is, a hundredth of a millionth BTC. In the future, however, the protocol may be updated to allow further subdivisions, should they be needed.
Further examples of units
- 1 BTC = 1,000 mBTC (millibitcoin)
- 1 BTC = 1,000,000 μBTC (microbitcoin)
- 1 BTC = 100,000,000 Satoshis
- 1 mBTC = 100,000 Satoshis
- 1 μBTC (microbitcoin) = 100 Satoshis
Note that it's possible that future protocol versions will introduce amounts smaller than a Satoshi, if deemed required by the community. I'm not sure how likely this is. http://bitcoin.stackexchange.com/questions/122/will-we-ever-need-smaller-amounts-of-bitcoin-than-a-satoshi
@eMansipater It might be worth editing your answer just a touch to ensure that people don't think that there is a limit to the number of decimal places possible.
@ripper234 not likely, when 1BTC = US$1,000,000 then 1 Satoshi will be exactly 1c.
@ripper234, I think the protocol would only update once 1 Satoshi is worth more than 1 cent or smallest denomination in one of today's fiat currencies since it would be needed by that culture that used BTC.