Pseudonymization is a data protection technique that replaces private information with fake identifiers, or pseudonyms. This process helps to protect individuals' identities while still allowing data to be used for analysis or research. For example, instead of using a person's real name, a unique code could be assigned, making it harder to trace the data back to the individual. This method is particularly important in fields like healthcare and finance, where sensitive information must be handled carefully. By using pseudonymization, organizations can comply with regulations like the General Data Protection Regulation (GDPR) while still gaining valuable insights from their data.