Demonetisation refers to the act of stripping a currency of its legal tender status, typically during a national currency change to combat issues like cash hoarding, fake currency, undeclared income, and illegal activities such as terrorism and corruption. The document discusses the methods for handling old notes and the mixed impacts of demonetisation on the economy, including both positive effects like increased traceability and negative effects on sectors like housing and consumption. It also highlights the public's reactions and government-imposed withdrawal limits during the transition period.