Type aliases in Kotlin allow defining an alias for an existing type. This helps simplify generic types and function signatures. The document discusses using type aliases to define a Weight type as a Double to represent weights in kilograms for classes like Human and Dog. It also shows how to extend the Weight type with properties and functions to work with grams by defining an extension on the Kg type alias. This allows classes that use the Weight type to interact with weights in grams through the Kg alias without needing to know the underlying type is Double.