User-defined functions (UDFs) in SQL are custom-built procedures that perform specific operations. They are crucial for modularizing code, improving readability, and reducing redundancy. Think of them as mini-programs within your database. Creating a function involves defining its input parameters, the logic to be executed, and the data type of the output. This modular approach promotes code organization and maintainability. Functions can be used in queries, just like built-in functions, making your SQL more efficient and easier to manage. For example, you can create a function to calculate the age of a customer based on their birthdate, or a function to format a date in a specific way. This reusability is a key benefit, as you don't need to write the same logic multiple times.