Bayes' theorem is a way to calculate conditional probability and update beliefs based on evidence. It states that the probability of an event A given event B is the probability of B given A multiplied by the probability of A, divided by the probability of B. The theorem is demonstrated through an example where a doctor uses it to calculate the probability that a patient with stiff neck has meningitis based on known conditional probabilities of symptoms and disease prevalence. Bayes' theorem is useful in science and many applications because it provides a framework for revising hypotheses based on new empirical evidence or data.