Dilution refers to the process of reducing the concentration of a substance in a solution. This is often achieved by adding more solvent, such as water, to a solution. For example, if you have a glass of orange juice and you add water, the juice becomes less concentrated, making it taste milder. In finance, dilution occurs when a company issues additional shares, which can decrease the ownership percentage of existing shareholders. This often happens during fundraising rounds or when stock options are exercised. As a result, the value of each share may decrease, impacting the overall worth of the company and its investors.