A 1m by 1m square is defined as having one area unit, leading to the question of why the area of a rectangle is calculated as length multiplied by breadth. The discussion suggests that by constructing squares based on the rectangle's dimensions, one can intuitively understand this relationship. It emphasizes that area is a two-dimensional measure, requiring multiplication of the length by the breadth to account for both dimensions. The conversation also touches on the idea that other shapes, like circles, could define area differently, but practical reasons favor the square definition due to its properties. Ultimately, the area of a rectangle is derived from the fundamental definition of area as the space contained within a two-dimensional shape.