Bitcoin has no account balances. Every input in a transaction instead points at one specific earlier output, the coin it spends. That pointer is called an outpoint.
Two parts
- The txid of the transaction that created the output (32 bytes).
- The output's index in that transaction, called
vout(4 bytes, starting at 0).
So "txid:1" means "the second output of that transaction".
Why it matters
A node checks every outpoint against its UTXO set. If the output does not exist, or has already been spent, the transaction is invalid. That check is how double spending is stopped. When a transaction confirms, its spent outpoints are removed from the set and its new outputs are added.