Bits in the processors represent the memory addressing power. 1 bit processor can have 2 memory addressing location, whereas 2 bit processor can have double addressing location which is 4. Going up per bit will double the memory addressing power of previous one. 32 bit processors can address maximum 4Gigabytes of RAM and 64 bit processors can address 16 Exabytes of RAM. This is the main difference between these two processors. As far as the operating system is concerned, you can use 64 bit OS if you have more than 4GB RAM and 32 bit OS if you have RAM lower than 4GB.
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