What exactly does database normalization do?

New to database and so no to get upset with simple questions.
As far as my googled and gathered knowledge normalization reduces redundancy of data and increase the performance. But really, I didn’t understand what exact reason for dividing the master table into other small tables, applying relationship among them, retrieving the data using all possible unions,subqueries,joins etc., Why can’t we have all the data in a single table and retrieve them as on required. I’m little confused.

What exactly does database normalization do?