What is umask in Linux/Unix?

The User file-creation mode mask (umask) is use to determine the file permission for newly created files. It can be used to control the default file permission for new files. It is a four-digit octal number .

Default umask for normal user is 0002.
Default umask for root user is 0022.
Default base permission for directories & files are 0777 (rwxrwxrwx) & 0666 (rw-rw-rw-) respectively.
To calculate directory permission for root user
Default Permissions : 777
Subtract umask value: 022 (-)
Allowed Permissions : 755
To calculate file permission for root user
Default Permissions : 666
Subtract umask value: 022 (-)
Allowed Permissions : 644
The following example explains the steps needed to set umask for permissions 700 for user files. The idea very simply only user is allowed to read or write file.
Default Permissions: 777
Subtract umask value: 077 (-)
Allowed Permissions: 700
$ umask 077
$ touch file.txt
$ ls -l file.txt
Output:

-rw------- 1 demo demo 0 2008-10-10 12:21 demo.txt