In Blender, a bounding box is a virtual rectangular prism that encapsulates an object or group of objects and defines their spatial extent, which is crucial for operations in 3D graphics. Bounding boxes provide a visual reference for an object's size and position, and allow for easier object selection and manipulation compared to complex object geometry. They also improve efficiency in viewport rendering, collision detection, physics simulations, and animation by providing a simpler representation of objects. Blender supports different types of bounding boxes including axis-aligned and object-aligned boxes.