Custom annotations in Java are user-defined metadata that extend the capabilities of built-in annotations like @Override and @Deprecated. They allow developers to add additional information to classes, methods, fields, and parameters, which can be processed at compile time or runtime using reflection. Custom annotations are classified based on their retention policy—SOURCE, CLASS, or RUNTIME—determining when they are available during the program’s lifecycle. By creating custom annotations, developers can enhance code readability, reduce boilerplate code, and implement specific behaviors without relying on external configurations. This flexibility makes custom annotations a powerful tool in Java programming.