Lot size sets the dollar value of each pip. Standard lot: about $10 per pip on USD-quoted pairs. Mini: $1. Micro: $0.10. Many brokers allow fractional lots.
Retail traders should size by risk-per-trade and stop distance, then choose the lot size, rather than picking a lot size first.
Example: $10,000 account, 1% risk = $100, 40-pip stop. Required pip value = $100 / 40 = $2.50, which is 2.5 mini lots or 25 micro lots.
Related: micro-lot, pip, lot, position-sizing