The pressure reading that you see on surface (pump pressure) is the total pressure used to move drilling mud through the system. The total pressure is a summation of pressure loss in all sections of the system. From the definition, we can write into a mathematical relationship like this.
Pump Pressure = P surface equipment + P drill pipe + P drill collar + P down hole tools + P bit + P annulus
The illustration below demonstrates the pressure loss in the drilling system.
Ideally, you want the maximum pressure drop at the bit and little pressure loss from the rest of the system.
Reference: Drilling Hydraulic Books