The hardware component that processes data in a computer is the Central Processing Unit (CPU). The CPU acts as the brain of the computer, executing program instructions, performing arithmetic and logical operations, and controlling the flow of data within the system. It contains critical parts such as the Arithmetic Logic Unit (ALU), which handles computations, and the Control Unit, which directs operations based on instructions. Other components like system memory (RAM) temporarily store data for the CPU but do not process the data themselves. The CPU is essential for interpreting and carrying out commands from both hardware and software.