Refactoring is altering the internal structure of code without changing its external behavior or functionality. It improves code quality by increasing readability and maintainability through disciplined, behavior-preserving transformations. Successful refactoring requires codebase knowledge, a structured API, and unit testing to safeguard against unexpected side effects of changes. Refactoring takes less effort than rewriting code from scratch and helps ensure quality by keeping the system fully working after each small change.