Normalization is a database design technique that organizes tables to reduce redundancy and dependency of data. It divides larger tables into smaller, linked tables. The purpose is to eliminate redundant data and ensure data is stored logically. This structures the database optimally by reducing redundancy, ensuring consistency, and removing anomalies from data insertion, updating, and deletion. When decomposing relations through normalization, the decomposition must be lossless and preserve dependencies to maintain data integrity.