Encapsulation is one of the fundamental concepts of object-oriented programming (OOP). It refers to bundling data and methods that operate on that data within a class. This hides the values and state of the data from outside usage. Encapsulation helps bind data and functions together, hides data from direct access, and makes code more flexible and maintainable by allowing changes without affecting other code. The benefits of encapsulation include increased reusability, reduced complexity by hiding implementation details, and extensibility by allowing updates without changing input/output formats.