Dreambooth is a technique used to teach new concepts to Stable Diffusion using a specialized form of fine-tuning. It is used to place people in fantastic situations or incorporate new styles. However, Stable Diffusion overfits quickly with Dreambooth, so finding the right learning rate and training steps for the dataset is important. Dreambooth requires more training steps for faces, and prior preservation is important to avoid overfitting. If the generated images are noisy or of poor quality, it indicates overfitting, and the DDIM scheduler or more inference steps can be used to address the issue.