Federalism is a system of government where power is divided between a central authority and smaller political units, like states or provinces. In countries like the United States, the national government handles issues that affect the entire country, such as defense and foreign policy, while individual states manage local matters like education and transportation. This division allows for a balance of power, ensuring that no single entity has complete control. It also enables states to tailor their laws and policies to better fit the needs of their residents. Overall, federalism promotes both unity and diversity within a nation.