Broadcasting is a powerful feature in numpy that allows arrays of different shapes to be used together in arithmetic operations. When numpy sees arrays with different shapes, it checks if they are compatible by comparing dimensions from the end. If dimensions are equal or one is 1, numpy stretches the smaller array along that dimension to match the bigger one. This lets you add, subtract, or multiply arrays without writing loops or reshaping manually. In the example, a 1D array A with shape (3,) is added to a 2D array B with shape (3,1). Numpy broadcasts A to shape (1,3) and B is already (3,1), so the result is a (3,3) array with element-wise sums. If shapes are not compatible, numpy raises an error. Broadcasting saves time and code, making numpy operations simple and fast.