Oxidative phosphorylation occurs in the mitochondria, where ATP is produced through the transfer of electrons from NADH or FADH2 to O2, creating a proton gradient that drives ATP synthesis via ATP synthase. The process is regulated by cellular energy demands, with ADP levels influencing the rate of respiration and ATP regeneration. Under hypoxic conditions, a protein inhibitor named IF1 prevents ATP hydrolysis, maintaining ATP production by blocking ATP synthase from reversing its function.