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Baking pretty much puts the look of the high poly model on top of the low poly model, without editing the low poly mesh itself. (maybe Fartuess can explain better, i'm not great at explaining  )
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Yup. As Daft.Eng said. I only add that baking itself isn't that hard. For example in program called xNormal (freeware aplication) you only have to load HP model, LP model and choose what type of map you want to bake (in our case normal map) an resolution of it, directory where you want to save it and it's all
