Each test should create its own data and clean up after itself. Shared test data is the number one cause of flaky tests and mysterious failures.
Look for: test data isolation (each test creates its own data), factories and builders for test data generation, avoiding shared test data, database snapshots for integration tests, anonymised production data for realistic testing, and environment-independent test data strategies.
Practical challenge that separates experienced QA from beginners. Test data management is often the hardest part of test automation. Candidates with thoughtful strategies here tend to build more reliable test suites.