What is parameter sniffing in SQL Server and how do you fix it?

Parameter sniffing occurs when SQL Server compiles a plan optimized for first parameter values and reuses it for others.

When a stored procedure runs, SQL Server compiles an execution plan based on initial parameter values (sniffed values). If later executions use different data distributions, the plan may become suboptimal. This leads to performance instability. Fixes include OPTIMIZE FOR, RECOMPILE, local variables, and dynamic SQL.