Scalability refers to the capability of a system to handle an increasing amount of work or its potential to be enlarged to accommodate growth. In the context of software and system design, scalability is crucial for ensuring that applications can manage rising user demands, data volumes, and transaction loads without compromising performance. There are two primary types of scalability: horizontal scaling, which involves adding more machines to distribute the load, and vertical scaling, which enhances the power of existing machines. Understanding scalability is essential for building resilient and efficient systems that can adapt to changing requirements over time.