Tokenization is the process of converting sensitive data, such as credit card numbers or personal information, into a unique identifier called a token. This token can be used in place of the original data for transactions or storage, ensuring that the sensitive information is not exposed. The original data is securely stored in a database, while the token can be safely shared or processed. This method is commonly used in industries like finance and healthcare to enhance security and comply with regulations. By using tokenization, organizations can reduce the risk of data breaches and protect customer privacy while still enabling necessary operations.