Matrix diagonalization is the process of taking a square matrix and converting it into a special type of matrix–a socalled diagonal matrix–that shares the same fundamental properties of the underlying matrix. Matrix diagonalization is equivalent to transforming the underlying system of equations into a special set of coordinate axes in which the matrix takes this canonical form. Diagonalizing a matrix is also equivalent to finding the matrix’s eigenvalues, which turn out to be precisely the entries of the diagonalized matrix. Similarly, the eigenvectors make up the new set of axes corresponding to the diagonal matrix.
The remarkable relationship between a diagonalized matrix, eigenvalues, and eigenvectors follows from the beautiful mathematical identity (the eigen decomposition) that a square matrix can be decomposed into the very special form
(1)

where is a matrix composed of the eigenvectors of , is the diagonal matrix constructed from the corresponding eigenvalues, and is the matrix inverse of . According to the eigen decomposition theorem, an initial matrix equation
(2)

can always be written
(3)

(at least as long as is a square matrix), and premultiplying both sides by gives
(4)

Since the same linear transformation is being applied to both and , solving the original system is equivalent to solving the transformed system
(5)

where and . This provides a way to canonicalize a system into the simplest possible form, reduce the number of parameters from for an arbitrary matrix to for a diagonal matrix, and obtain the characteristic properties of the initial matrix. This approach arises frequently in physics and engineering, where the technique is oft used and extremely powerful.
Reference : MathWorld