In SQL Server, the `string_agg` function is used to concatenate strings from multiple rows into a single string. This is particularly useful when you need to combine data from different records into a single output, such as listing all customer names in a single string. Unlike older methods of string concatenation, `string_agg` is optimized for performance and handles null values gracefully. It's part of the built-in string aggregation functions, making it a standard part of the SQL Server toolkit. This function is crucial for tasks like generating comma-separated lists, creating reports with combined data, and building dynamic queries. It's a significant improvement over manually concatenating strings in loops or using other less efficient methods.