Acid-alcohol decolorization is a critical step in the Gram staining procedure, used to differentiate bacterial species into Gram-positive and Gram-negative based on their cell wall characteristics. This process involves applying a mixture of acid and alcohol to remove the primary stain from Gram-negative bacteria, which have thinner peptidoglycan layers, while Gram-positive bacteria retain the stain due to their thicker peptidoglycan walls.