A "bunt" is a ball batted (or tapped) into the infield by the batter while holding the bat sideways in front of him, usually between his hands. This is a deliberately short hit that is normally designed to advance a runner and not to gain first base for the batter.
A bunted ball that rolls foul is considered a strike, even if it is the third strike.
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It depends on what the league rules are. High school and college softball you are allowed to bunt. Most often once you reach a certain age in a youth league you're allowed to bunt. (I'm assuming you're talking about fast-pitch softball)
Whenever your coach tells you to is probably the best idea. But if the coach tells you its up to you then make sure you don't have any strikes and its best to make sure there is already someone on first base because then if you make it base then you go two on the field but if you get out you can always advance the runner.