This example shows how a function in C returns a value. When 'add' is called with 2 and 3, it calculates the sum and returns 5. The return statement ends the function immediately. The returned 5 replaces the function call in 'main' and is stored in 'result'. Variables 'a' and 'b' hold the input values during the function execution. Beginners often wonder why code after return doesn't run; it doesn't because return exits the function. Also, the return value is what the caller receives and can use. If a return is missing in a function that should return a value, the result is unpredictable.