Folding preserves air bubbles that have been beaten into them, which produces fluffier batter.
One perfect example I can think of is black forest cake, which doesn’t rely on any chemical leaveners. Instead, the volume of the cake entirely comes from the air beaten into the eggs, which is why it’s very important to fold it together carefully to avoid deflating it.
If you just beat it all together, you’ll get a dinky little disk instead of a fluffy cake.
As said, folding keeps the air in the mix.
So for example if you were making a chocolate meringue, to add chocolate to the mix you would mix it in a portion of the egg mixture to make sure it was fully mixed through. Then fold it through the remaining mixture to keep as much air in while passing the ingredient through.
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