Coalescing filters operate on the principle of consolidating similar or identical data points. For instance, consider a streaming service that collects user activity data in real-time. Without a coalescing filter, every interaction with the platform might generate a separate data point. This could lead to overwhelming amounts of data—rendering the system slow and inefficient. However, a coalescing filter can aggregate these interactions by reducing them to singular entries that still convey the intended information, thereby simplifying the dataset.