Tokenization is the process of replacing sensitive data, such as credit card numbers or personal information, with unique identifiers called tokens. These tokens have no intrinsic value and cannot be used outside of their specific context, providing a layer of security for sensitive information.

Tokenization is commonly used in payment systems, where it helps protect cardholder data during transactions. When a user enters payment details, the system generates a token that represents the original data, which is then stored or transmitted securely. The actual sensitive data is stored in a separate, secure database called a token vault.