From Compsci.ca Wiki
What are Bits?
Bits are the pseudo-currency used on our forums. One can earn, recieve, donate, and spend their Bits.
How to obtain Bits?
The current system grants 1 Bit for creating a new thread on the forums, and 2 Bits for making a reply. Users should be careful not to make meaningless posts though, because when deleted, the user loses 5 Bits.
It should be noted that no Bits are awarded for making posts in either General Discussion or Off Topic. The reason is that those forums are considered to be mostly recreational posting, and often spawn lengthy humorous discussions.
How to obtain more Bits?
The best way is to contribute to the community. Based on obvervations, the most Bits are rewarded for something that impresses other users. Active community members will often donate Bits for a good tutorial on a new subject, or source code for an interesting application. It is also customary to donate some Bits when you've been helped out with a question, as a sign of courtesy.
Every so often, there will also be various contests and/or competitions taking place. Often involving the writing of a small snippet of code, these events are a great way to score some bonus Bits and to show off your coding skills, or simply gain some practice.
Alternatively one could also watch out for any ongoing community efforts, such as WCG. Bits could be given out for participation, though one should take part regardless as the efforts are usually in good nature.
What about Moderators?
Moderators have their Bit count set to a constant 1000, so it's easy to spot the official staff members even if you miss their creative "moderator" tag. This means that moderators are one of the primary sources of generating Bits, as they reward posts and submissions. It also means that one shouldn't donate bits back to moderators as those Bits will disappear. If you really want to show your appreciation to a moderator user, ask them if you could contribute to anything through a Private Message.
The Future of Bits
In the much talked about V3 system, which hopefully will be at least partly implemented soon, the bit economy will be greatly changed (or so it is thought). The rates for getting bits per post will be changed. As well, new methods of getting bits will be introduced. An example of this could be a bits lottery system where users can buy lottery tickets with bits and at the end of the week some one could win the jackpot of bits. Ideas such as getting 1 bit per topic view are also being thought about, but due to the potential for abuse it is unlikely that it will be implemented any time soon. In addition it is likely that the possible rewards that you can exchange your bits for will be changed in the new system as well.