Proteolysis is the breakdown of proteins into amino acids through the action of proteolytic enzymes or proteases. It occurs through both exopeptidases and endopeptidases in various compartments like lysosomes and through the ubiquitin-proteasome system. Proteolysis plays a vital role in regulating proteins and activating enzymes and is important for processes like digestion, cell cycle regulation, and apoptosis. It allows for the degradation of unneeded or damaged proteins and the activation of zymogens in biological systems.