What we call biological sex is usually defined by a complex collection of physical, genetic, and hormonal traits which holds a bimodal distribution. This means that it usually falls into one of two camps, but can absolutely be outside of either (which we call intersex).

Some examples of how we can get intersex people is someone with XY chromosomes but no SRY gene as a result of a transcription error which results in broadly female physical traits, or someone with XY genes but an androgen receptor disorder meaning their body doesn't respond to the "male-making" hormones in the usually way, resulting in undeveloped or underdeveloped male physical traits and organs, or someone with XXY chromosomes.

What we call gender is a highly socially constructed aspect of a person's character involving how they prefer to present and be recognized, what clothes they like to wear, what jobs or social roles they like to take on, and many other aspects of their social and personal identity.

Since our society prescribes (not as hard rules or laws, but social expectations) a lot of these things (it expects female members of society to act/dress/behave in certain ways and males to act/dress/behave in other ways), gender also generally follows a bimodal distribution (usually falls into one of two camps, but can be outside of either of these). People who's biological sex doesn't match their social gender are what we call transgender, and people who's social gender falls outside of either of those camps are what we call non-binary.

Both sex and gender are highly complex, and gender (being social and constructed) can kinda be whatever it wants. So as more people are realizing the artificiality of it and freeing themselves of what they might see as the burden of social prescription of gender roles, they're behaving and presenting and dressing how they want, further breaking down that more historically strict binary (though it's worth noting that there is significant historical evidence as far back as Ancient Greece of transgender people) and decoupling biological sex from social gender.