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.
Render baking creates 2D bitmap images of a mesh object’s rendered surface. These images can be re-mapped onto the object using the object’s UV coordinates. Baking is done for each individual mesh, and can only be done if that mesh has been UV-unwrapped. While it takes time to set up and perform, it saves render time. If you are rendering a long animation, the time spent baking can be much less than time spent rendering out each frame of a long animation.
Use Render Bake in intensive light/shadow solutions, such as AO or soft shadows from area lights. If you bake AO for the main objects, you will not have to enable it for the full render, saving render time.
Use Full Render or Textures to create an image texture; baked procedural textures can be used as a starting point for further texture painting. Use Normals to make a low-resolution mesh look like a high-resolution mesh. To do that, UV-unwrap a high-resolution, finely sculpted mesh and bake its normals. Save that normal map, and Mapping (texture settings) the UV of a similarly unwrapped low-resolution mesh. The low-resolution mesh will look just like the high-resolution, but will have much fewer faces/polygons.
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