Reddit reviews Absolute BSD: The Ultimate Guide to FreeBSD

Basically, there are two things at work in a .tar.bz2 archive. The .tar part tells you that it's a "tarball" or tape archive (which is what tar is short for, apparently). It was originally an application for working with tape drives, but it works fine for storing whole directories as a single file and extracting them in various other places.

The .bz2 part is the extension for files compressed with the bzip2 compression algorithm. You'll probably just as often see files with the extension .tar.gz, which are tar files compressed with the gzip algorithm. There are various advantages and disadvantages to both methods of compression, but you probably aren't concerned with that bit.

Here's what appears to be a decent tutorial with more information on how to work with "tarballs". Hope it gives you the details you're looking for:

http://www.thegeekstuff.com/2010/04/unix-tar-command-examples/

Also, it might be useful to note that the Archive Manager program that comes with Ubuntu allows you to create and unpack tar.bz2 or tar.gz archives as well.

Edit: I recall this book having a really good section in chapter 3 on working with tar including background on how to use it with tape drives, even.