Floating Point Arithmetic is a method used in computers to represent real numbers that can have fractional parts. It allows for a wide range of values by using a format that includes a sign, an exponent, and a mantissa. This representation is essential for performing calculations in scientific and engineering applications where precision is important. However, Floating Point Arithmetic can introduce errors due to its limited precision. Not all decimal numbers can be represented exactly, leading to rounding errors in calculations. Understanding these limitations is crucial for developers and engineers to ensure accurate results in their programs and applications.