In React, context allows components to share data easily. First, you create a context with createContext and give it a default value. Then, you wrap parts of your component tree with a Provider that sets the context value. Inside any component, you use the useContext hook to get the current context value. If no Provider is used, the default value is returned. When the Provider's value changes, components consuming the context re-render to show the new value. This example shows a ThemeContext with default 'light'. DisplayTheme component reads the theme and displays it. Without a Provider, it shows 'light'. With Provider value 'dark' or 'blue', it updates accordingly. Removing Provider falls back to default again.