terminal prompt directory length

• PS1: The default promt you see when you open a shell
  It's value is stored in an environment variable called PS1. To see its value, type
  echo $PS1
  This will give you something like
  

  \[\e]0;\u@\h: \w\a\]${debian_chroot:+($debian_chroot)}\u@\h:\w\$
  

  To change it, you can set a new value for the variable:
  

  export PS1="\u > "
  

  This will result in a prompt like this:
  

  stefano > 
  

• PS2: is your secondary prompt. This get's shown when a command is not finished. Type echo "asd and hit enter, the secondary prompt will let you enter more lines until you close the inverted commas.
• PS3 is the prompt used for select(2)
• PS4 is the prompt used for stack traces (default: +)

To make the changes permanent, you append them to the end of .bash_profile (or .bashrc, see this question) in your home directory.
Here's a more or less complete list of shorthand that you can use when composing these:

• \a     The 'bell' charakter
• \A     24h Time
• \d     Date (e.g. Tue Dec 21)
• \e     The 'escape' charakter
• \h     Hostname (up to the first ".")
• \H     Hostname
• \j     No. of jobs currently running (ps)
• \l     Current tty
• \n     Line feed
• \t     Time (hh:mm:ss)
• \T     Time (hh:mm:ss, 12h format)
• \r     Carriage return
• \s     Shell (i.e. bash, zsh, ksh..)
• \u     Username
• \v     Bash version
• \V     Full Bash release string
• \w     Current working directory
• \W     Last part of the current working directory
• \!     Current index in history
• \#     Command index
• \$     A "#" if you're root, else "$"
• \\     Literal Backslash
• \@     Time (12h format with am/pm)

You can of course insert any literal string, and any command:

export PS1="\u \$(pwd) > "

Where $(pwd) stands in place of "the output of" pwd.

• If the command substitution is escaped, as in \$(pwd), it's evaluated every time the prompt is displayed, otherwise, as in $(pwd), it's only evaluated once when bash is started.

If you want your prompt to feature colours, you can use bash's colour codes to do it. The code consists of three parts:

40;33;01

• The first part before the semicolon represents the text style.
  
  • 00=none
  • 01=bold
  • 04=underscore
  • 05=blink
  • 07=reverse
  • 08=concealed
• The second and third part are the colour and the background color:
  
  • 30=black
  • 31=red
  • 32=green
  • 33=yellow
  • 34=blue
  • 35=magenta
  • 36=cyan
  • 37=white

Each part can be omitted, assuming starting on the left. i.e. "1" means bold, "1;31" means bold and red. And you would get your terminal to print in colour by escaping the instruction with \33[ and ending it with an m. 33, or 1B in hexadecimal, is the ascii sign "ESCAPE" (a special character in the ascii character set). Example:

"\33[1;31mHello World\33[m"

Prints "Hello World" in bright red.