Finite Difference is a numerical method used to approximate solutions to differential equations. It involves replacing continuous derivatives with discrete differences, allowing for the analysis of functions at specific points. This technique is widely used in fields such as engineering, physics, and finance to model dynamic systems. The basic idea is to calculate the difference between function values at neighboring points, which provides an estimate of the derivative. By applying finite difference methods, one can solve problems like heat conduction or fluid flow by transforming complex equations into simpler algebraic forms that can be easily computed.