Naruhodo (なるほど) means “I see” or “that makes sense”: the reply when an explanation finally clicks.
The detective lays out the clues, and the sidekick nods slowly: なるほど…！ In anime it is the sound of a mystery coming together. In real life you hear it in almost every conversation.
What it actually means
なるほど is more than “I heard you”. It says “now I understand why” — usually right after someone has given you a reason or an explanation.
どうして この みせは ひとが おおいですか。
Why are there so many people at this shop?
やすいからです。
Because it's cheap.
なるほど！
Ah, that makes sense!
Careful with people above you
Here is the catch: なるほど can sound as if you are judging whether the explanation was good enough. To a teacher or a boss, a bare なるほど can come across as a little cheeky. The safe replies are そうですか (“is that so?”), そうなんですね (“oh, I see”) and わかりました (“understood”). Once you know someone well, なるほど、そうなんですね is fine too.
Can you use it?
With friends and people at your own level, all the time. Nod, say なるほど, and you sound like you are really following. Two in a row — なるほど、なるほど — means “go on, I'm with you”.