A dipole-induced dipole interaction occurs when a polar molecule with a permanent dipole induces a temporary dipole in a nonpolar molecule. The polar molecule's positive and negative ends create an uneven distribution of electron density in the nearby nonpolar molecule, causing it to become temporarily polarized. This interaction is significant in various chemical processes, including solubility and molecular interactions. For example, when water (a polar molecule) interacts with oxygen (a nonpolar molecule), the dipole-induced dipole effect helps explain how gases can dissolve in liquids, influencing biological and environmental systems.