Divisibility is the ability to divide different goods, in this case money, into smaller monetary units. A coin or a paper note needs to be divided into smaller units to make a currency divisible. This is an important factor for any currency as it allows for payments in smaller amounts than one major unit.
In its most basic form, divisibility ensures that money can be divided into smaller parts so it is usable in an economy. Divisibility is one reason why humanity changed from gold as a currency. Gold and other metals are not as easy to divide or transport.
It is an important tool for ensuring economic stability and properly functioning markets allowing economic growth. Governments manage the money supply to maintain appropriate levels of divisibility, enabling a functioning financial system.
Compared to the limited divisibility of traditional money, Bitcoin and other cryptocurrencies allow for a much higher divisibility. This allows for even more flexibility. Important to note is that more divisibility does not mean more supply and does not result in inflation.