Nitrogen fixation is the incorporation of atmospheric nitrogen into ammonia by various bacteria, catalysed by nitrogenase. This is an essential stage in the nitrogen cycle and is the ultimate source of all nitrogen in living organisms.
Atmospheric nitrogen is inert and cannot be used by living forms. This nitrogen is first converted into forms like nitrates and nitrites by nitrogen fixing bacteria or through lightning. Plants generally take up nitrates and nitrites and convert them into amino acids (used to make proteins) as well as other complex compounds containing nitrogen. These proteins and other complex compounds are subsequently consumed by animals.
Once the animal or the plant dies, other bacteria in the soil convert the various compounds of nitrogen back into nitrates and nitrites. A different type of bacteria converts the nitrates and nitrites into elemental nitrogen. Thus, nitrogen passes from its elemental form in the atmosphere into simple molecules in the soil and water, which get converted to more complex molecules in living beings and back again to the simple nitrogen molecule in the atmosphere. This is the nitrogen-cycle in nature. (The figure is fig 14.6 in NCERT)