Inheritance allows new classes called derived classes to be created from existing classes called base classes. Derived classes inherit all features of the base class and can add additional attributes or features specific to that derived class. For example, a base class called fruit could have derived classes like mango, orange, and banana that each have their own defined features in addition to the features of the base fruit class. Inheritance promotes reusability and saves time and effort by allowing code to be reused in derived classes without needing to be reworked.