Carbon dioxide produced during the reaction of baking powder plays a crucial role in leavening baked goods. When exposed to moisture and heat in the oven, the acid (usually cream of tartar) and base (usually baking soda) components of baking powder react, releasing carbon dioxide gas. This gas gets trapped in the dough or batter, causing it to expand and rise. The carbon dioxide forms bubbles, creating a light and airy texture in the baked goods. This leavening action is essential for producing soft, fluffy, and well-textured cakes, muffins, and other baked items, enhancing their overall quality and palatability.