Mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions or blockchain. This ledger of past transactions is called the block chain as it is a chain of blocks. The block chain serves to confirm transactions to the rest of the network as having taken place.
For example, when someone sends a bitcoin to someone else, the network records that transaction, and all of the others made over a certain period of time, in a “block”. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, blockchains are inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires collusion of the network majority.
Mining is also the mechanism used to introduce bitcoins into the system. Miners are paid transaction fees as well as a subsidy of newly created coins, called block rewards. This both serves the purpose of disseminating new coins in a decentralized manner as well as motivating people to provide security for the system through mining.