Intel 8085 is a 8 bit processor whereas 8086 is a 16 bit processor,what does the number of bit specify?
How many bits wide its registers are: usually, its data registers (the ones which can load and store data and perform logical and arithmetical functions).
The 8086 has 16-bit data and address registers, and a 16-bit data path to external memory.
The 8088 has 16-bit data and address registers, but only an 8-bit data path to external memory. Because it is internally identical to the 8086, it is also considered to be a 16-bit processor.
The 8085 has 8-bit data registers and 16-bit address registers. The address registers (apart from SP) are made up of pairs of 8-bit data registers. The fact that it is possible to add one address register to another isn't enough to make the processor considered to be "16-bit".
This number indicates the width of the supported bus, and practically is the basic unit of the processors: the registers are (usually) in this size and all supported operations are defined (usually) on operands on this size.