"Two points off starboard bow" refers a system of identifying the position of an object relative to the position of a boat or ship. Marine navigators call this the "relative bearing" system, because the reported position is relative to parts of the vessel. This has the advantage of allowing a deck hand or other minimally-trained individual to give a reasonably accurate report of an object's position without the need for a compass.
Points System
Under the points system, each point is 11.25 degrees. Zero points is the travel direction of the vessel or the direction the bow is pointing. Navigators and deck hands only use points to describe positions that are to one side or the other, and "dead ahead" or "dead astern" to report positions that are directly in front of or behind the vessel, respectively.
Port and Starboard
On a boat, port is the left side and starboard is the right. Each side of the boat has 16 points of position reporting. Therefore, eight points starboard is directly to the right side of the vessel. Eight points port is directly to the left side.
Compass Points
The relative bearing system differs from the layout of a compass in that a compass is divided into portions of a full circle, whereas relative bearing is based upon a half circle. Two points off the starboard bow is 22.5 degrees on the compass, or north-northeast. Two points off the port bow would be north-northwest, but instead of 22.5 --- zero plus 22.5--- degrees it would be 337.5 --- 360 minus 22.5 --- degrees.
Green and Red
Less commonly, navigators report a position as "two points green" for starboard or "two points red" for port. This refers to the navigational lights, which are green on the starboard side and red on the port side. This system is even easier for an untrained passenger of the boat to use, since it is a simple matter for a person who has difficulty remembering which side is starboard and which is port to simply look at the color of the light.