An ADC (Analog to Digital Converter) is needed because microcontrollers cannot read analog voltages directly. Sensors often output analog signals like voltages that vary continuously. The ADC converts these voltages into digital numbers that the microcontroller can understand and use. For example, if a sensor outputs 2.5 volts, the ADC might convert this to a digital value of 512 (on a 10-bit scale from 0 to 1023). The microcontroller reads this number and can make decisions, such as checking if the value is above a threshold. This process is essential for embedded systems to interact with the real world.