A load balancing algorithm is significant because it optimally distributes network traffic across multiple servers, ensuring no single server becomes overwhelmed. This enhances application performance and increases reliability by preventing server overload. Effective load balancing also improves user experience by minimizing latency and downtime, which is crucial for high-availability systems. Such algorithms can employ various strategies, like round-robin or least connections, to determine how to distribute incoming requests efficiently. Thus, load balancing is essential in maintaining the smooth operation of web services and applications.