The C4 diagram is a visual modeling technique used to represent the architecture of a software system. It provides a clear and concise way to communicate the system's components, their relationships, and the overall structure. This diagram allows stakeholders to understand and analyze the system's key elements, including containers, components, and classes. By utilizing a C4 diagram template, architects and developers can save time and effort in creating standardized and visually appealing diagrams, facilitating effective communication and decision-making throughout the software development process.