In cloud computing, an Availability Zone (AZ) is a logical data center within a region that is designed to be an isolation point. Each AZ is physically separate and isolated from the other AZs within the same region. This design provides a high degree of fault tolerance and stability.

Availability Zones work by providing a way to run applications and databases in multiple locations to prevent a single point of failure. Each AZ has its own power, cooling, and physical security, and is connected to other AZs in the same region via low-latency links. This allows for synchronous replication between AZs for high availability and durability.

Consider a company, CloudCorp, that hosts its application on AWS. To ensure high availability and fault tolerance, CloudCorp distributes its application across multiple Availability Zones within the same region. This way, if one Availability Zone experiences an outage, the application continues to run in the other Availability Zones, ensuring uninterrupted service to its users.