Context switching refers to the process of storing and restoring the state of a CPU so that multiple processes can share a single CPU resource. When a CPU switches from one task to another, it saves the current task's state, including its registers and program counter, allowing it to resume later without losing progress. This process is essential in operating systems like Windows or Linux, where multiple applications run simultaneously. However, frequent context switching can lead to performance overhead, as the CPU spends time saving and loading states instead of executing tasks, potentially slowing down overall system performance.