Deadlock occurs when a set of processes are blocked because each process is holding a resource and waiting for another resource held by another process, forming a circular chain. There are four conditions for deadlock: mutual exclusion, where a resource can only be held by one process; hold and wait, where a process can hold resources while requesting more; no preemption, where a resource cannot be forcibly removed from a process; and circular wait, where there is a circular chain of processes each waiting on a resource held by the next process. An example is given of a traffic deadlock where cars block each other in a circular formation on a single-lane road.