1) Good little jam piece, but really not effective for the concept. I was expecting more of a side-by-side comparison than an extended solo, all mixed together. The drums made the difference murkier.
2) That said, I could hear the difference, but I actually know what I'm listening to. He didn't actually explain the difference in sound- The $100 bass is grittier- The more expensive pickups are smoother and have less hum, feedback, and general noise. They also capture a wider profile, so the low notes sound deeper and the high notes fuller. The cheap pickups are a little like listening through a tiny speaker.
3) Much of the cost difference between these is mostly due to materials and craftsmanship.
As general rule, a guitar under $250 is probably crap- Made from the cheapest materials in a Chinese factory by assembly line workers who may just as well be making radios or sneakers. The cheapie you buy in a music store will be a little better than the one from Walmart or something.
A good, solid instrument made in a factory, but by people trained to really work with the product they make, will cost anywhere from $400-$1500- Though it is entirely possible to find something on the low end of that which is fully comparable to another instrument on the higher end. Most of the difference is going to be in slightly better materials, finish detail, and how much care the final setup / quality control people put into it.
Once you're over $2500, you're into "handmade by a real craftsman" territory, and there are so many variables it's kind of hard to give a nutshell version.
Of course, that's for new, off-the-rack guitars. Vintage, used, and custom instruments are each their own thing.
There's also the problem I keep seeing (LOOKING AT YOU GIBSON) with a lot of manufacturers- Taylor and Paul Reed Smith come to mind- Where they build their reputation on luthier made instruments, then switch over to factory made stuff without dropping their prices- They're still very high quality instruments, but I can't bring myself to pay $3500 for something CNC cut on an assembly line using the same stuff the next factory over is using to make $500 versions that are almost as good.