Caffeine enhances exercise performance primarily through its role as a stimulant affecting the central nervous system. It can increase alertness and reduce the perception of fatigue, allowing athletes to train harder and for longer durations. Caffeine also promotes the mobilization of fatty acids, making them available as energy sources during endurance exercises. Additionally, it can improve strength output in high-intensity workouts. However, the effects may vary based on individual tolerance and consumption levels, so moderation is key for optimal benefits.