Node.js for I/O bound, Not for CPU bound.

What do these terms 'I/O bound' and 'CPU bound' mean?

 I/O bound

This is the case for typical Node.js web server application. Majority of the time is spent waiting for network, filesystem and perhaps database I/O to complete. Increasing hard disk speed or network connection improves the overall performance.
In its most basic form Node.js is best suited for this type of computing. All I/O in Node.js is non-blocking and it allows other requests to be served while waiting for a particular read or write to complete.

 CPU bound
An example of CPU bound application would be a service that calculates SHA-1 checksums. Majority of the time is spent crunching the hash - doing large amount of bitwise xors and shifts for the input string.
This kind of application leads to trouble in Node.js. If the application spends too much time performing CPU intensive task all other requests are being held up. Node.js runs a single threaded event loop to concurrently advance many computations, for example serving multiple incoming HTTP requests. This works well as long as all event handlers are small and yet wait for more events themselves. But if you perform CPU intensive calculation your concurrent web server Node.js application will come to a screeching halt. Other incoming requests will wait as only one request is being served at a time - not a very good service.
There are strategies to coping with CPU intensive tasks. You can separate the calculation to elsewhere - forking a child process or using cluster module, using low level worker thread from libuv or creating a separate service. If you still want to do it in the main thread, the least you can do is give the execution back to the event loop frequently with setImmediate().

Conclusion
A typical healthy Node.js server application is I/O bound. That is what Node.js is designed for and handles well using the single-threaded event loop. CPU bound tasks cause trouble if not handled correctly - by yielding execution frequently back to the event loop or moving it to another thread, process or service. 

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