The MVVM pattern separates an application into three main components: the Model, the View, and the ViewModel. The Model defines the data and business logic. The View displays the UI. The ViewModel acts as an intermediary between the Model and View by providing data and handling UI logic and user input. It notifies the View of changes using events. This allows for separation of concerns and testable code. The View binds to the ViewModel rather than the Model directly using properties, commands, and events to update the UI asynchronously as data changes.