A data flow diagram (DFD) is a visual representation that illustrates how data moves through a system. It shows the flow of information between different components, such as processes, data stores, and external entities. DFDs help in understanding how data is processed and where it originates and terminates, making them useful for system analysis and design. DFDs consist of various symbols, including circles for processes, arrows for data flow, open-ended rectangles for data stores, and squares for external entities. By using these symbols, stakeholders can easily identify how data interacts within a system, facilitating better communication and planning for projects involving software development or business processes.