Deadlock occurs when two or more processes are waiting for resources held by each other in a circular chain, resulting in none of the processes making progress. There are four conditions required for deadlock: mutual exclusion, hold and wait, no preemption, and circular wait. Deadlock can be addressed through prevention, avoidance, detection, or recovery methods. Prevention aims to eliminate one of the four conditions, while avoidance techniques like the safe state model and Banker's Algorithm guarantee a safe allocation order to avoid circular waits.