Test-driven development (TDD) is a software development process where unit tests are written before code to define desired functionality. The TDD cycle involves writing a failing test, then code to pass the test, and refactoring code. TDD encourages simple code design and finding defects early. Benefits include more modular, flexible code and high test coverage catching defects early. Shortcomings include difficulty testing interfaces and potential for false sense of security if not supplemented with other testing. Designing for testability with high cohesion, loose coupling, and published interfaces supports effective TDD.