Medallion architecture provides a structured and scalable framework for managing data through three layers: bronze (raw data), silver (cleaned and transformed data), and gold (business-ready data), progressively improving data quality. The architecture enhances data management by ensuring scalability, security, and adaptability, although it presents challenges such as time consumption and increased storage costs. Implementing best practices like automation and performance monitoring can help organizations leverage medallion architecture effectively for data-driven decision-making.