There are two uranium isotopes present on earth, U-235 and U-238. U-235 is the fissile material which powers nuclear reactions in both nuclear bombs and nuclear power plants. The 5% number represents the fraction of uranium in the fuel which is U-235 instead of U-238. Anything above 20% or so is considered "highly enriched", and nuclear bombs often have fuel which is 80-90% U-235.

To add to what other commenters have said, apart from the weapons proliferation issues, enriching uranium is very expensive. U-235 only makes up about 0.72% of natural uranium, the rest of it being U-238. Running a reactor on low enriched uranium is much more cost effective, although reactor designs that can run on LEU can be less safe, like Chernobyls RBMK design.