Texture baking is the process of transferring details from one model to another.

The baking tool starts a certain distance out from the model (usually a low-resolution model for game use), and casts rays inwards towards another model (usually a high-resolution sculpt). When a ray intersects the 2nd model, it records the surface detail and saves that into a texture map, using the first model’s Texture Coordinates.

Baking tools support multiple map types. High-resolution normals go into a Normal map, occlusion goes into an Ambient occlusion map, etc…