The bid and ask are the best potential prices at which an asset can be bought or sold at a given point in time. They are based on the current limit orders on the market/exchange.

The bid is the maximum price buyers are willing to pay for an asset.

The ask is the minimum price sellers are willing to receive in exchange for their asset.

A trade occurs when the buyer and sell agree on a price that is no higher than the bid, and no lower than the ask. This can either be when someone places a new limit order that matches with the current bid-ask prices, or when someone does a market order. Market orders fill at the best bid-ask rate at that time.

For example, let's say BTC's current price is $8500, with the bid being $8495 and the ask being $8505, and you wish to purchase some (go long on) BTC. If you do a market order, it will fill at $8505 (assuming enough people are selling at $8505 to completely fill your order, if not it will keep taking the best price until it is all filled).

If you do a limit order at $8500, the new bid price will move up to $8500 to match the new highest price someone is willing to pay. The order will fill when there is a seller willing to sell at $8500. If $8500 is never hit (because the price keeps moving higher), then the order will never fill. But if the ask price matches or moves below your bid price, the order will fill at the best ask price (but no higher).

The spread, is the difference between the bid and the ask. So for the example above, the spread would be $10 ($8505 minus $8495).