Theory of Magnetism

If a magnet was to be cut in many pieces, that smaller pieces become many smaller individual magnets themselves with their own N poles and S poles.
We can thus see that a bar magnet is made up of many such "tiny magnets" known as
magnetic domains.

Magnetic Domains

The orbiting electrons in a magnetic material makes each atom an atomic magnet. A group of atomic magnets pointing in the same direction is called a magnetic domain. The diagram on the left shows the domains of a unmanetised bar. The domains point at random directions. The magnetic effects of the atomic magnets cancel out so there is no resultant magnetic effect, thus the bar is not magnetised. In a permanent magnet, magnetic domains point in the same direction. The atomic magnets at the ends of a bar magnet fan out due to repulsion between the poles.
The maximum strength of a magnet is reached when all the domains are pointing in the same direction. In this state, the magnet is said to be magnetically saturated and cannot be any stronger.