BC is an abbreviation of the words "before Christ" and is used in reference to the time before the birth of Jesus. AD is an abbreviation of anno Domini, a Latin term meaning "in the year of the Lord." AD generally applies to the time since Christ's birth.
Christ's birth is commonly used as the central point from which the years are counted. Starting with AD 1, we count forward until we reach the present year. Years BC, starting with 1 BC, are counted backward in time. For example, 100 BC refers to the time 100 years before the birth of Jesus.
Actually, due to a chronological mistake by Archbishop James Ushur, an Anglican theologian (AD 1581-1656) who essentially established the BC/AD system by calculating the date of Jesus' birth (Annales Veteris et Novi Testamenti, published in 1650-54), this reckoning is flawed. Jesus was born earlier than the starting point of this system by approximately three years—in the year 4 BC—a fact that was not understood until more modern times.
The Jews count time from 3761/3760 BC. The Hebrew Calendar, which sets the holy days, is based upon this date. Recently, historians and archeologists have begun to reject the "Christian" BC/AD terms and adopted the acronyms BCE ("Before the Common Era") and CE ("Common Era"). However, the dates themselves remain the same.