Extensions are the recommended way to customize Microsoft Dynamics 365 Business Central because they allow developers to add or modify functionality without changing Microsoft's standard application code. Extensions are built using the AL programming language and deployed as separate packages, making customizations easier to maintain and upgrade. This extension-based approach supports Microsoft's upgrade-safe development model. Since the base application remains untouched, businesses can adopt new Business Central updates with minimal impact on existing customizations. Extensions can be used to create custom pages, tables, reports, APIs, business logic, and integrations with external systems. They also support event-driven programming, allowing developers to extend standard functionality using event subscribers rather than modifying core objects. This results in more maintainable, scalable, and future-proof Business Central solutions.