A canonical URL quite sometimes used to describe the homepage of the sites. Mostly the URL which we want visitors to see.

The canonical URL make search engine identifies certain similar URLs that are actually same. Sometimes in a website the content is accessible via multiple URLs
If the webpage using rel=canonical it helps in ranking of the original page.   

The webmasters get assisted to identify the duplicate content issues using the canonical URLs.It does this by specifying the “canonical” or “preferred”. It improves SEO of the site also.

SEO Benefit:

    1. SEO of the website improves.
    2. it can search count of all the links of different versions of the link to single version.Engine knows which version is canonical.

The process of canonicalization:

Sometimes in e-commerce sites there are more than one choices for a products URL,canonicalization is the process of picking one.

How to set canonical URLs:

    For example, these are their URLs:

        http://example.com/magento/seo-plugin/
        http://example.com/magento/plugins/seo/

You would apply rel=canonical as follows:

        1.You pick one of your two pages as the canonical version.

        2.Add a rel=canonical link from the non-canonical page to the canonical one.
        like : 
        <link rel="canonical" href="http://example.com/magento/seo-plugin/">

What this does?
    

The rel=canonical “merge” the two pages into one from on search engine’s perspective without redirecting the user ( “soft redirect” ).

When should we use canonical URLs 301 redirect or canonical?

• If to do a redirect and we have no technical reasons, we should always do a redirect.
• If we cannot redirect because that would break the user experience or be otherwise problematic:         set a canonical URLs.

Should a page have a self-referencing canonical URL?

    We must as it solves duplicate content issue from someother person doing it.

 Faulty canonical URLs: 

Don’t canonicalize a paginated archive to page (search engines will actually not index the links on those deeper archive pages), Make them 100% specific.