There are different materials the bits are made of which has an impact on cost.
I believe they are:
Steel
Titanium
Carbide
Cobalt
(These may only be coatings on the higher end materials)
I am sure there are more type, but these are the ones I recall.
This is from my recollection a month or two ago, so please do not take this as law.
Steel was for general wood, plastic, soft/thin metal.
Titanium - do not recall the details
Carbide stayed sharper longer and withstood higher temps. Was for moderate metal drilling.
Cobalt was highest heat tolerance and used for hardened metals.
Hi Terracar. There really is a lot of confusion about the different materials used for drill bits, but essentially there are only two materials in common usage, steel (though various different alloys) and carbide. Most other materials mentioned are just coatings.
Both HSS and "Cobalt" (more correctly called HSS-co) are actually just slight variations on the HSS steel alloy. Carbide types are the only ones that are really a different material (and not just a HSS variant).
Carbide types are essentially a ceramic (tungsten carbide and/or titanium carbide and/or tantalum carbide) in metal (often cobalt) matrix. These are much harder than either HSS or HSS-co.
There is also a lot of confusion about HSS, primarily because it is not really one specific alloy. Indeed there can be vastly more difference between two different "HSS" bits than there is between HSS and colbalt (HSS-co), and the best HSS bits are only about 2 HRC (Rockwell hardness C) points less than that of HSS-co. Specifically about 63 to 65 HRC for good HSS compared with about 65 to 67 HRC for the best HSS-co bits.
Hardness isn't everything though, and two materials of the same hardness do not necessarily have the same abrasion/wear resistance. Indeed HSS-co has significantly better abrasion resistance despite not being all that significantly greater hardness. What this means in practice is that HSS-co can't ultimately drill materials very much harder than can plain HSS, though it can hold it's sharpness a lot better while doing so. This is more of an advantage for people doing production work than for occasional use in a home workshop.
Referring back to the "plain HSS" types. The biggest confusion here is the large amount of variation in what exactly is referred to as "HSS". Almost all types of "plain HSS" are steel alloys containing tungsten (W), molybdenum (Mo), chromium (Cr) and vanadium (V). However there are many different alloys with different ratios of those ingredients, yet they all may be labelled as "HSS".
For example a common alloy ratio for good quality HSS drill bits contains 6% W, 5% Mo, 4% Cr and 2% V, whereas a common HSS alloy for cheap Chinese bits is only 4% W, 2% Mo, 4% Cr and 1% V. Yet they will both be marked as "HSS" despite the cheap Chinese one having approximately half of the most critical ingredients for good red hardness.