Functions in Python are essential building blocks that allow programmers to encapsulate code into reusable segments. A function is defined using the def keyword, followed by a name and parentheses that may include parameters. This modular approach not only enhances code organization but also promotes reusability, making it easier to manage and maintain. Functions can perform specific tasks, return values, and can be either built-in or user-defined. By breaking down complex problems into smaller, manageable functions, developers can write cleaner and more efficient code, ultimately improving the overall functionality of their programs.