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A minimal pair consists of two or more words which only differ in one single sound. These sounds are then used contrastively, i.e. to distinguish meaning. Let us take a look at the following examples:
Orthography
bit
bid
bin
bill
Pronunciation
/bit/
/bid/
/bin/
/bil/
All of the above examples are minimal pairs since they only differ in the word-final sound. As can be seen, the word's orthography cannot be used as an indicator as two letters, for instance <ll> in <bill> can be represented as a single sound.
Sounds which serve to distinguish different lexical items are said to occur in contrastive distribution. They are sometimes also called oppositions. In order to test whether sounds occur contrastively a so-called commutation test is carried out. For that matter one sound is replaced by another and if that leads to a different meaning, the sounds are in contrastive distribution and the words form a minimal pair.
For further information about distribution patterns click here