Ray tracing is a technique for rendering realistic images by simulating the physical behavior of light, including reflection, refraction, color, and shadows. It works by tracing the path of light as rays emitted from the camera lens and calculating what objects they intersect. This allows for effects such as shadows, reflections off mirrors or transparent surfaces, and refraction through transparent objects. While it produces highly realistic images, ray tracing is also computationally intensive compared to other rendering techniques.