Like Cuilan said, the purpose of bit.ly is to map longer urls into short urls that fit into tweets, text messages, etc.
The danger is that you have absolutely no idea where the link goes until you click it. Could be a rickroll; could be a site with malicious scripts; could be a phishing site; you never know.
Bottom line: Unless you're running firefox+adblock+noscript or chrome+equivalent (or lynx!) I wouldn't even think of clicking on it.