Yeast is a fungus that eats sugar and produces alcohol and co2 bubbles. In the case of baked goods, there’s not enough time for the alcohol to build up really, and what is made is just evaporated off from baking. The co2 bubbles is what stretches the dough and leaves little air pockets.
It’s dormant in those dry yeast packets and gets “woken up” when it gets hydrated with warm water.
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