Tokenization is a data security technique that replaces sensitive information, such as credit card numbers or personal identification numbers, with a unique identifier known as a token. The token itself has no exploitable value and cannot be reverse-engineered to reveal the original data. The actual sensitive data is stored securely in a separate database called a token vault. Tokenization helps reduce the risk of data breaches and ensures compliance with regulations by limiting the exposure of sensitive information within a system. It is widely used in payment processing and other industries that handle confidential data to enhance security and protect against fraud.