The LAG() function is a powerful tool in SQL that enables you to reference data from prior rows within a result set. Imagine you have a table tracking daily sales figures. Using LAG(), you can easily compare today's sales to yesterday's, or calculate the difference in sales between consecutive days. This is crucial for analyzing trends and patterns in your data. LAG() is especially helpful when working with time-series data or data that needs to be analyzed in a sequential manner. It's a fundamental function for data analysis and reporting, allowing you to perform calculations and comparisons across related rows. For instance, in a log of user activity, you could use LAG() to determine if a user's current action is different from their previous action.