A UTXO (Unspent Transaction Output) is a specific chunk of Bitcoin you can spend. When you receive Bitcoin, it creates a new UTXO in your wallet. When you spend, that UTXO becomes the input for the transaction, and any leftover change creates new UTXOs. Each UTXO is like a one-time-use coin in your wallet. The more UTXOs (inputs) you use, the higher the transaction cost will be.