Code coverage is a software testing metric that measures the percentage of code executed during tests. It helps developers identify which parts of their codebase have been tested and which have not, ensuring that critical paths are verified for correctness. By analyzing code coverage reports, teams can improve their testing strategies, focusing on untested areas to enhance software quality. Higher code coverage often indicates a more robust testing process, but it does not guarantee the absence of bugs, as it only reflects the execution of code, not the quality of tests.