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Bhāvanā (lit. "development through meditation") is the Pāli term that most broadly describes the practice of meditation. It it divided into the disciplines of tranquility meditation (samatha-bhāvanā) and insight meditation (vipassanā-bhāvanā).
This practice trains the ability of mind to be calm and focused and thereby develops samādhi — concentration.
This practice trains the ability of mind to perceive reality as it is and thereby develops paññā — understanding.
Bhāvanā is practiced by sitting down, closing the eyes, and concentrating at a single point, typically the breath. Tranquility and insight meditation differ only by the "narrowness" of the focus. In tranquility meditation, the focus is kept strictly on the single point, while in insight meditation, there is enough mental space left to register a secondary object of meditation.
See the Meditation FAQ for details.