User-defined functions (UDFs) in SQL are custom functions created by users to execute specific tasks within a database, providing a way to optimize application performance by reducing data transfer between application and database layers. UDFs are written in SQL and consist of a name, arguments, a return statement, and a function body, allowing developers to perform operations directly on the database, thus minimizing latency. The creation process for UDFs varies across different database systems like PostgreSQL, MySQL, and CockroachDB, each with its syntax and features. In real-world applications, UDFs can perform complex tasks beyond simple arithmetic, such as converting timestamps into more readable formats. While they offer efficiency, UDFs must be carefully managed to avoid unintended side effects or data mutations, using additional function attributes like IMMUTABLE and LEAKPROOF to guide database behavior and optimize performance.