Direct Memory Access (DMA) allows peripheral devices to access memory independently of the CPU. This improves data transfer rates by bypassing the CPU and allowing the peripheral to communicate directly with memory. DMA transfers take place in three steps - the CPU initiates the transfer by providing transfer parameters to the DMA controller, the DMA controller performs the direct transfer between memory and peripheral, and an interrupt signals the CPU when the transfer is complete. DMA is useful for high-speed transfers of large blocks of data like those involving hard drives or network cards.