I am glad you asked as although I use it every day and know it is wireless I really didn’t know how the technology worked. So here we go. According to Wikipedia it was invented by Ericsson back in 1994 as a wireless technology standard for exchanging data over short distances (using short-wavelength UHF radio waves in the ISM band from 2.4 to 2.485 GHz[ from fixed and mobile devices, and building personal area networks (PANs).
It was first thought of as a way to get rid of the serial cables that used to connect printers and screens to desktop computers. Not that they aren’t still around but most have moved onto USB connections. So basically Bluetooth is a wireless technology that is used over short distances. Very good examples are computer mice and wireless speakers.
Let’s not get into all the tech as you will never remember it when telling someone else. Things to remember are that a Master Unit (say your computer) can only connect to a maximum of 7 bluetooth devices at a time with most offering less than that number. So you can work with your mouse while streaming to your speakers and doing a couple of other things. If you can find 7 bluetooth devices to use at a time you are more imaginative than me.
Most devices come in Class 1 that can go about a metre (mouse) and Class 2 that can go for about 10 metres (speakers). Class 3 is industrial so it is unlikely you will need it. The master device is overruled by the slave. No good having more powerful Bluetooth on your laptop if your mouse is Class 1.
So in summing up Bluetooth allows you to connect devices to your phone, laptop, etc. So next time you are wearing those wireless headphones, using your wireless mouse or listening to those wireless speakers thank Ericsson for coming up with such a brilliant technology.