What is the purpose of a decoupling capacitor in a digital circuit?

A decoupling capacitor, also known as a bypass capacitor, is used in digital circuits to stabilize the power supply voltage by filtering out noise and providing a local energy reservoir for integrated circuits. It is typically placed close to the power supply pins of ICs to smooth out voltage fluctuations caused by rapid switching activities and to suppress high-frequency noise. Decoupling capacitors help in maintaining a stable operating voltage for the ICs, thereby improving the reliability and performance of the digital system.