Process whitelisting involves creating a list of only the processes permitted to run on a system. This protects against harmful applications by only allowing whitelisted processes. It is important for closed environments with limited applications to track what is running. Advantages include preventing unwanted applications, maintaining an approved list, checking application risk scores, and identifying infected systems. The process works by checking any new process against the whitelist, excluding approved ones, and alerting or appending to the whitelist based on checking unrecognized files with VirusTotal.