Functions in C allow programmers to package blocks of code that perform tasks. Functions make code reusable and easier to understand by separating code into modular units. A function has a name, list of arguments it takes, and code that is executed when the function is called. Functions can communicate between each other via parameters passed by value or by reference. Parameters passed by value are copied, so changes inside the function don't affect the original variable, while parameters passed by reference allow the function to modify the original variable. Functions can also call themselves recursively.