This lecture introduces finite state machines (FSMs), a crucial concept in digital systems. The instructor begins by reviewing memory elements like latches and flip-flops, emphasizing their role in storing states. The discussion transitions to FSMs, highlighting their importance in designing practical systems that combine combinational and sequential logic. Two main types of FSMs are covered: Mealy and Moore machines, each defined by their output dependencies. The instructor explains the structure of these machines, detailing how state transitions occur in sync with clock signals. The lecture includes examples of FSM analysis and design, demonstrating how to model these systems in Verilog. The instructor emphasizes the significance of state diagrams and state tables in understanding FSM behavior. The session concludes with a practical example of designing a traffic light controller, illustrating the application of FSM concepts in real-world scenarios. Overall, this lecture provides a comprehensive foundation for understanding and implementing finite state machines in digital systems.