Magnetization results from the response of a material to an external magnetic field. Ferromagnetic and ferrimagnetic materials have strong magnetization in a magnetic field and can be magnetized to have magnetization in the absence of an external field, becoming a permanent magnet. Magnetization is not necessarily uniform within a material but may vary between different points. Magnetization also describes how a material responds to an applied magnetic field as well as the way the material changes the magnetic field, and can be used to calculate the forces that result from those interactions.
Demagnetization is the reduction or elimination of magnetization. One way to do this is to heat the magnet above its Curie temperature, where thermal fluctuations have enough energy to overcome exchange interactions, the source of ferromagnetic order, and destroy that order. Another way is to pull it out of an electric coil with alternating current running through it, giving rise to fields that oppose the magnetization.
One application of demagnetization is to eliminate unwanted magnetic fields. For example, magnetic fields can interfere with electronic devices such as cell phones or computers, and with machining by making cuttings cling to their parent.