OFDM stands for orthogonal frequency division multiplexing. This is an effective multiplexing technique for broadband wireless data transmission. Without this technique, a broadband data rate such as 2Mbps (to support future video multimedia services) can cause a serious inter-symbol interference (ISI). This is because under a fast data rate, one symbol time can be shorter than the delay time due to multi-path effect, thereby leading to ISI. OFDM was invented to counteract such a type of ISI by splitting a high data rate onto several subcarriers, each carrying a much lower data rate. On each subcarrier, one symbol time is longer than the delay time due to multi-path effect, thereby eliminating ISI.

In OFDM, each subcarrier corresponds to a frequency within a certain spectrum. The traditional FDM technique divides a spectrum into multiple narrowband windows, of which each has a central frequency, and between any two neighbouring narrowbands, a guard band is guaranteed to escape interference between neighbouring frequencies. Nonetheless, the traditional FDM is inefficient in spectrum utilization. A more efficient way is to allow neighbouring narrowbands to somehow overlap. Specifically to avoid interference between neighbouring narrowbands, when one narrowband reaches a maximal power at its central frequency, it should be guaranteed that the other narrowband reaches a zero power on the frequency. This essentially makes these narrowbands be orthogonal. By doing this, OFDM can largely improve the spectrum utilization, which is a double of that of the tradition FDM technique.

In addition to counteracting multi-path, OFDM can also be viewed as an effective approach to transforming broadband frequency-selective fading into narrowband flat fading as each subcarrier has a much narrow band that can fall into a flat-fading spectrum portion. As an efficient wideband data transmission technique, OFDM now has been widely used in WiMax networks.