In blockchain technology, sharding involves breaking down the entire network's database into smaller shares, or shards, that can process transactions independently. Each shard contains its own data and has its own processing capacity. This distribution allows for parallel processing of transactions, significantly increasing the overall throughput of the blockchain. Instead of having every node process every transaction, only the relevant nodes deal with specific shards. Thus, sharding helps to reduce the workload on individual nodes, avoiding bottlenecks and enhancing scalability.