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Baking, in general, is the act of pre-computing something in order to speed up some other process later down the line. Rendering from scratch takes a lot of time depending on the options you choose. Therefore, Blender allows you to „bake“ some parts of the render ahead of time, for select objects. Then, when you press Render, the entire scene is rendered much faster, since the colors of those objects do not have to be recomputed.