Tokenization transforms sensitive data into a token, which is a unique identifier that has no meaningful value outside of the tokenization system. Unlike encryption that can be reversed with the decryption key, tokenized data requires access to the original mapping in the tokenization system to convert it back, ensuring enhanced security by preventing reverse-engineering of the tokens if the database is compromised. In the case of protecting credit card information, tokenization is ideal because the tokens can be used for transactional processes without exposing actual credit card numbers.