Data encapsulation is a process in networking where the protocol stack of the sending host adds headers (and sometimes trailers) to the data.
Each layer of the OSI or TCP/IP model adds its own header to the data as it passes down the layers, preparing it for transmission over the network.
For example, in the TCP/IP model, data starts at the application layer and is encapsulated at each subsequent layer (Transport, Internet, and Network Access) before being transmitted.
This encapsulation ensures that the data is correctly formatted and routed to its destination, where the headers are stripped off in reverse order by the receiving host.
Reference:
Networking Fundamentals by Cisco
OSI Model and Data Encapsulation Process
Understanding TCP/IP Encapsulation