Bleed. Sounds...not good, right? Well, no need to worry, "bleed" is a term used in the printing/graphic design world; it does not involve actual blood; and if you don't already know what it is, now's your chance to learn!
Quiz time! Say you wanted a 5"x7" postcard designed. What size (dimensions) do you think I will design the file at?
a) 5" x 7"
b) 5.25" x 7.25"
c) 10" x 14"
If you answered (b), you are correct. So why would I create the file slightly larger than it will end up being? Well the extra quarter of an inch added to the width and the height are called the "bleed". Bleed is necessary if you want your design to extend all the way to the edge of your paper. When the printer receives the design with the bleed, they will print it on a sheet of paper larger than 5" x 7". Then, they will trim it down to the finished size. Having an extra 1/8" added to each side provides allowance for the slight margin of error that is natural to the trimming process. Because otherwise, if the trim were not exactly precise, and you had no bleed, there would be a thin white line around one or more edges of your finished piece.
A 1/8 inch (.125") bleed is most common, though your particular printer may require different specifications based on your project.
Bleed is really only necessary if your design extends to the edge of your piece. Something like this doesn't require a bleed:
But something like this definitely does:
Regardless, I normally start each project with a bleed area set, because there's no telling if the end product will require it or not. It's standard procedure in my book, because it is much easier to start off with bleed and end up not needing it, than to set up a project without bleed and having to go back and add it in--particularly if there are images involved.
So, now that you know I'm only "bleeding" my projects, and not physically gushing blood, you can rest easy. And since you learned something, I think you can go ahead and chalk this up as a successful day, yes?