Bank owned, foreclosed, REO (real estate owned) all refer to properties currently owned by a lender. In these situations the current homeowner fell behind on payments and was foreclosed upon (the process varies from state to state but the ending's the same.) 

As to whether these are good homes to buy, it depends ... nearly every bank owned home is going to require a little bit of work. Most homes, bank owned or otherwise, do but with a bank owned home the property usually is being sold as-is and repairs usually won't be made (there are exceptions, but this is what normally happens.)

Most banks price these homes aggressively, either at or below the recent sales. Again, there are some exceptions. So from a pricing standpoint, they could be a good buy depending on the amount of work that needs to be done to the property. In some cases, for the amount of work necessary, it almost is easier to purchase a non-bank owned where repairs can be negotiated.

Condition of the property also can influence your ability to get financing. FHA, for example, has some set standards any property must meet for financing to be available.