That's a great pic of Lacey tracking up, Wallaby!
When a horse is on the bit, he is totally accepting of all the aids, not just the bit. Personally, I like "on the aids" better than "on the bit" as a description, its much less confusing, IMHO, especially considering that a horse properly on the bit isn't having the bit messed with in his mouth. It's a tricky concept, one that can be greatly misunderstood, and that my horse and I are still learning ourselves.
At the risk of explaining myself through articles yet again, here are a couple of good ones that may be helpful. The Art of Classical Riding--On the Bit The Three-Second Solution: Putting Your Horse On the Bit
The second one is a bit lengthy, fair warning.