From BR Bullpen

Interference occurs any time a batting team acts in a way that impedes the fielding team's attempt to play the ball.

Section 2.00 of the Official Rules describes different types of interference:

(a) Offensive interference is an act by the team at bat which interferes with, obstructs, impedes, hinders or confuses any fielder attempting to make a play. If the umpire declares the batter, batter-runner, or a runner out for interference, all other runners shall return to the last base that was in the judgment of the umpire, legally touched at the time of the interference, unless otherwise provided by these rules.
Rule 2.00 (Interference) Comment: In the event the batter-runner has not reached first base, all runners shall return to the base last occupied at the time of the pitch.
(b) Defensive interference is an act by a fielder which hinders or prevents a batter from hitting a pitch.
(c) Umpire's interference occurs (1) When an umpire hinders, impedes or prevents a catcher's throw attempting to prevent a stolen base, or (2) When a fair ball touches an umpire on fair territory before passing a fielder.
(d) Spectator interference occurs when a spectator reaches out of the stands, or goes on the playing field, and touches a live ball.
On any interference the ball is dead.

The situation described under (b) is known as catcher's interference.

Interference is also explained in detail in section 7.09 of the rules, in the chapter pertaining to the runner. Penalties for interference are described in this section.

A common case of interference occurs when a batted ball hits a baserunner in fair territory. The ball is dead, the runner is automatically out, the batter is credited with a single and other baserunners only advance if forced to do so. If the ball hits the runner in foul territory, it is simply a foul ball.

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