In crypto, baking is the process of verifying transactions and creating new blocks on the Tezos blockchain. Bakers on the proof-of-stake Tezos network perform the function of validating transactions and producing new blocks.
Baking blocks involves checking a block of transactions to ensure accuracy before recording them in new blocks and adding them to the blockchain. A baker on the Tezos blockchain needs to stake their own XTZ tokens or can use tokens delegated to them by other users for participating in the PoS consensus mechanism and securing the blockchain.
The higher the number of XTZ staked, the higher the probability of the baker being selected to perform baking operations and earn rewards. The contribution of the baker's resources allows them to earn rewards in $XTZ for their efforts.