Booth's algorithm is a method for multiplying two signed or unsigned integers in binary representation more efficiently than straightforward algorithms. It uses fewer additions and subtractions by representing the multiplicand as 2's complement numbers. The algorithm loads the multiplicand and multiplier into registers, initializes a third register to 0, and performs bitwise shifts and arithmetic operations (addition/subtraction of the multiplicand) on the registers based on the values of bits from the multiplier. This process builds up the product one bit at a time in a third register.