Condorcet's Paradox occurs in voting systems when collective preferences can be cyclic, meaning that a group may prefer option A over B, B over C, and yet C over A. This situation creates a contradiction, as there is no clear winner among the options, despite each individual voter having consistent preferences. This paradox highlights a challenge in social choice theory, where the aggregation of individual preferences does not lead to a consistent group decision. It raises questions about the effectiveness of certain voting methods and the potential for irrational outcomes in democratic processes.