Fog computing refers to performing computing tasks closer to the source of data generation rather than solely relying on centralized cloud computing. It helps address issues like high bandwidth needs and latency by processing some data locally and only sending valuable aggregated data to the cloud. Fog computing is driven by the rise of IoT and is useful for applications requiring low latency like connected cars, smart grids, and healthcare. It aims to make decisions and processing occur as close to data generation as possible using localized computing resources and devices.