Counterfactual thinking involves imagining alternative outcomes to past events, usually focusing on what could have been better or worse. There are different types, such as upward counterfactual thinking which focuses on how a situation could have been better, and downward which considers how it could have been worse. The author provides personal examples, including struggling with a math test question and regretting choosing the wrong answer, as well as getting a lower GPA than hoped due to distracting video game play. While counterfactual thinking is normal and can influence mood, dwelling on past alternatives is not productive since the past cannot be changed.