A very simple analogy to use to understand bandwidth and traffic is to think of highways and cars. Bandwidth is the number of lanes on the highway and traffic is the number of cars on the highway. If you are the only car on a highway, you can travel very quickly. If you are stuck in the middle of rush hour, you may travel very slowly since all of the lanes are being used up.
Traffic is simply the number of bits that are transferred on network connections. It is easiest to understand traffic using examples. One Gigabyte is 2 to the 30th power (1,073,741,824) bytes. One gigabyte is equal to 1,024 megabytes. To put this in perspective, it takes one byte to store one character. Imagine 100 file cabinets in a building, each of these cabinets holds 1000 folders. Each folder has 100 papers. Each paper contains 100 characters - A GB is all the characters in the building. An MP3 song is about 4MB, the same song in wav format is about 40MB, a full length movie can be 800MB to 1000MB (1000MB = 1GB).
If you were to transfer this MP3 song from a web site to your computer, you would create 4MB of traffic between the web site you are downloading from and your computer. Depending upon the network connection between the web site and the internet, the transfer may occur very quickly, or it could take time if other people are also downloading files at the same time. If, for example, the web site you download from has a 10MB connection to the internet, and you are the only person accessing that web site to download your MP3, your 4MB file will be the only traffic on that web site. However, if three people are all downloading that same MP at the same time, 12MB (3 x 4MB) of traffic has been created. Because in this example, the host only has 10MB of bandwidth, someone will have to wait. The network equipment at the hosting company will cycle through each person downloading the file and transfer a small portion at a time so each person's file transfer can take place, but the transfer for everyone downloading the file will be slower. If 100 people all came to the site and downloaded the MP3 at the same time, the transfers would be extremely slow. If the host wanted to decrease the time it took to download files simultaneously, it could increase the bandwidth of their internet connection.