PEG is crucial in nanotechnology for several reasons: 1. Biocompatibility: PEG is non-toxic and non-immunogenic, making it suitable for biomedical applications. 2. Solubility: It can increase the solubility of hydrophobic drugs, facilitating their delivery. 3. Stability: PEGylation can enhance the stability of nanoparticles, preventing aggregation. 4. Stealth Properties: PEG can provide a 'stealth' characteristic to nanoparticles, allowing them to evade the immune system.