Network Address Translation (NAT) is a technique used in networking that allows multiple devices on a local network to share a single public IP address. This is particularly useful for conserving the limited number of available IP addresses and enhancing security by hiding internal IP addresses from external networks. When a device on the local network sends a request to the internet, NAT translates the private IP address to the public IP address. When the response returns, NAT translates it back to the appropriate private IP address, ensuring that the data reaches the correct device within the local network.