N2 fixation is nitrogen that has been turned into ammonia. This makes it able to be used as a nutrient for organisms. This N2 fixation occurs by nitrogen going through the nitrogen cycle.
What does it have to do with bacteria?
The bacteria are the ones that are "fixing" the nitrogen to change it to a different form. The bacteria are changing it so not only is it a different type of nitrogen, but it makes it a usable form form organisms.