How does wBTC work?

Could you please explain how Wrapped Bitcoin, or wBTC, actually functions? I'm quite curious about its underlying mechanism and how it interfaces with traditional finance and the broader cryptocurrency ecosystem. It seems to bridge the gap between these two worlds, but I'd like to have a deeper understanding of its operational details. How does the wrapping process work? And how does it ensure security and liquidity for its holders? Also, how does wBTC interact with decentralized finance applications and smart contracts? I'm eager to learn more about this fascinating topic.