Huffman coding is a method used for data compression that reduces the size of files by encoding information more efficiently. It works by assigning shorter binary codes to more frequently occurring characters and longer codes to less common ones. This way, the overall size of the data can be minimized without losing any information. The process begins with creating a Huffman tree, a binary tree structure that represents the frequency of each character. By traversing this tree, unique binary codes are generated for each character, allowing for effective compression. This technique is widely used in various applications, including file formats like JPEG and MP3.