Priority and severity are key components of a bug report. Priority indicates the order in which bugs should be fixed and how much retesting time is required. Severity refers to a bug's impact on the application. Testers set priority based on retesting needs and how much testing is blocked. Severity is less likely to change and refers to functionality impact. Different combinations of priority (low, medium, high) and severity (critical, major, moderate, minor, cosmetic) indicate different types of bugs.