React Hooks, such as useState and useEffect, allow functional components to incorporate stateful logic and manage side effects akin to class components, enabling developers to write more flexible and efficient code. Custom Hooks, which adhere to React's rules of only calling Hooks at the top level and within function components or other custom Hooks, provide a scalable way to reuse stateful logic across multiple components. In the tutorial described, a custom Hook named useCryptoFetcher is created to fetch cryptocurrency exchange rates from an API, illustrating the use of useState for managing state and useEffect for handling asynchronous data fetching, with optimizations to prevent unnecessary re-renders and API calls. This approach not only simplifies the codebase by eliminating redundancy but also enhances the application’s performance and maintainability. The use of custom Hooks demonstrates how they can be tailored to specific functionality needs, thereby reducing reliance on class-based components and expanding the versatility of React applications.