In MIPS processor, address bus is of 32 bits. So on addressing an instruction, a whole 32 bit instruction is fetched. How is it byte addressable then? I mean if on addressing a particular address, the memory sends 32 bits as a wholesome, how is it byte addressable?
"Byte addressable" means that a 32-bit address points to a single byte of memory, so if you increment that address, it points one byte further.
The opposite is "word addressable", where (on a 32-bit processor) every 32-bit address points to a 32-bit word, so if you increment that address, it points four bytes further in memory.
EDIT: As Ran G points out, byte addressable machines can address words too. But for the naming, we're concerned with the smallest unit they can address.