A bit (binary digit) has only 2 possible values: 0 and 1, off and on.
2 bits have 4 values: 00, 01, 10, 11
3 bits have 8: 000, 001, 010, 011
100, 101, 110, 111
In general, n bits have 2^n possible values.
2 bits: 2^2 = 4 3 bits: 2^3 = 8
4 bits: 2^5 = 16
0000 0001 0010 0011
0100 0101 0110 0111
1000 1001 1010 1011
1100 1101 1110 1111