Normalization is the process of organizing data in a database to minimize redundancy and dependency. It involves removing repeating groups, splitting tables to remove partial and transitive dependencies, and linking tables with primary and foreign keys. The three main steps are first normal form, which removes repeating groups; second normal form, which removes partial dependencies; and third normal form, which removes transitive dependencies. Normalization improves data storage and access, reduces anomalies, and helps maintain data integrity.