Read up about the Nitrogen cycle. Actually, probably a good idea to read through the basic info and useful info sections of the forum to get the basics down.
As for a system in a bedroom, so long as the sound of running water and/or air pumps doesn't cause you problems, then a small system in a bedroom would probably be ok. Just make sure the sound of running water doesn't cause you to wet the bed.
As to odors, in a properly balanced, designed, and stocked system, there should be no odor problem. A bad smell would be a sign that you don't have enough filtration or you are feeding the fish too much or there is not enough aeration.