Huffman Coding is a method used for data compression that reduces the size of files by encoding characters based on their frequency of occurrence. Characters that appear more frequently are assigned shorter binary codes, while less common characters receive longer codes. This approach minimizes the overall number of bits needed to represent the data. The process begins by creating a Huffman Tree, a binary tree where each leaf node represents a character and its frequency. By traversing the tree, unique binary codes are generated for each character, allowing for efficient storage and transmission of information without losing any data.