Acoording to wikipedia deflation is a general decrease in the price of goods. This means your money is worth more, you can get more stuff and are much richer. It's really great, in contrast to the stupid inflation of the evil banks.
Bitcoins are a deflationary currency in the long run. There is a set amount of coins that can be produced, also deleted coins cannot be recovered. Thus it cannot be questioned that bitcoins at last solve all problems of previous currencies.
Bruce predicts a price of $1000 per bitcoin at the end of the year, which won't be a problem for bitcoin usage as a currency as bitcoins can be easily divided.