virtualenv is a tool used in Python programming to create isolated environments for different projects. This allows developers to manage dependencies separately, ensuring that libraries required for one project do not interfere with those of another. By using virtualenv, you can maintain clean and organized project setups. When you create a new environment with virtualenv, it generates a directory containing a specific version of Python and its associated libraries. This makes it easy to install and manage packages using pip without affecting the global Python installation on your system.