Callback functions are a core part of Node.js asynchronous APIs. When you use an asynchronous function like fs.readFile, you pass a function as an argument—this is the callback. Node.js will execute your callback once the operation finishes, allowing your code to remain non-blocking and responsive.

Most Node.js API callbacks use the error-first callback convention. The first argument to the callback is always an error object (or null if there is no error). The remaining arguments contain the result of the operation. This pattern makes it easy to handle errors consistently. In the previous example, the callback checks if err exists before trying to use the file data.

However, using many nested callbacks can lead to a problem known as callback hell. This happens when you have multiple asynchronous operations that depend on each other, resulting in deeply nested code that is hard to read and maintain. Callback hell can make error handling and logic flow confusing, so it is important to be aware of this pitfall as you structure your asynchronous code.