Basic Points

• The bid is the highest price buyers are willing to pay for a security, and the ask is the lowest price that sellers are willing to offer. 
• The difference between the two prices is the bid/ask spread. Highly liquidsecurities such as SPY usually have a bid/ask spread of only one cent, even in the premarket and postmarket. 
• But if a security has a high bid/ask spread, you may want to be careful in setting your price on a trading order to not pay much more or sell for much less than you intended.

Advanced: Strategy

Examining the width of the bid/ask spread can be considered a more reliable way to gauge option liquidity than volume or OI (open interest), which can often be deceiving. But it is best to consider all three of these elements together (if tactically practical) when determining whether a stock is sufficiently liquid to trade without problems. 

If the spread on a stock or ETF is only a penny apart, such as it usually is on SPY and QQQ (even during the premarket and postmarket), then it is less important to worry about getting a good price. On highly liquid instruments like SPY, traders often prefer even to use marketable limit orders. This would mean to buy with a limit order above the ask, or to sell with a limit order below the bid. On SPY, the fills would usually be the same regardless of using market or marketable limit orders, and so this is often preferred—to make sure that one does not miss out on a good momentum trade just for trying to pinch a few cents.

For options however, the bid/ask spread can be very expensive as compared to their hard delta counterparts (stocks and futures), and so getting a good fill becomes more important. One way that this is managed is to use midpoints as an order preset. Some brokers also have off-the-shelf order types which can be used as tools that automate a penny walk between the bid and ask; for example, trying to execute a limit order at each penny level in between the bid and ask until there is a fill. 

This is a different concept than the width of the spread, which means the distance between strikes.