The Bellman equation is used to calculate the value of states in reinforcement learning and dynamic programming. It defines the value of a state based on the expected rewards from being in that state plus the discounted value of the next state. The document provides an example of using the Bellman equation to calculate the value of different states in an environment by starting from the final state and working backwards. Key elements of the Bellman equation include the action, next state, reward, and discount factor for weighing future rewards.