I'ts been a minute since I took computer organization, but the relevant wiki on 'Byte' gives some context.
The byte was originally the smallest number of bits that could hold a single character (I assume standard ASCII). We still use ASCII standard, so 8 bits per character is still relevant. This sentence, for instance, is 41 bytes. That's easily countable and practical for our purposes.
If we had only 4 bits, there would only be 16 (2^4) possible characters, unless we used 2 bytes to represent a single character, which is more inefficient computationally. If we had 16 bits in a byte, we would have a whole lot more 'dead space' in our instruction set, we would allow 65,536 (2^16) possible characters, which would make computers run less efficiently when performing byte-level instructions, especially since our character set is much smaller.
Correction, ASCII uses 7 bits.
Except "this sentence" isn't encoded in ASCII. It's encoded in UTF-8. ASCII has very limited and specialized usages. UTF-8 is an encoding for the Unicode character set. All text in HTML, XML, … is Unicode. See the HTTP response header for this page to see that the web server encoded it in UTF-8. (Hit F12, then F5, then select the request name 42842817.) If you consult the HTTP specification, you'll find that the HTTP headers are in fact ASCII. So we do use ASCII every day but we hardly ever use in new progams.
Is that why they call it UTF-8? Because its Using The Full 8 bit byte? haha
No. It's called UTF-8 because the code unit is 8 bits. Each code unit provides some of the bits needed for the 21-bit Unicode codepoint. A codepoint requires 1 to 4 UTF-8 code units. Similarly for UTF-16 and UTF-32. However, by design, a codepoint would never need more than one UTF-32 code unit.