Data modeling involves creating conceptual, logical, and physical data models of how entities are related in a database. The interview questions covered topics like different data modeling schemas (star vs snowflake), dimensions, facts, surrogate keys, normalization forms, and data warehousing concepts. The candidate discussed their experience working on a data model for a healthcare insurance project that used a snowflake schema to allow multi-dimensional analysis across entities like subscribers, providers, claims, and plans. Common data modeling mistakes like over-normalization and lack of purpose were also listed.