Token management in Laravel starts when a user sends a login request with email and password. The system checks if the user exists and verifies the password. If both are correct, Laravel creates a token string using createToken() and sends it back to the user. The user stores this token and includes it in the header of future requests. Each request's token is validated by Laravel. If the token is valid, the user is allowed access. If any check fails, an error response is sent. This process ensures secure authentication and authorization using tokens.