The Intel 8086 microprocessor is a 16-bit processor with a 20-bit address bus allowing access to 1MB of memory and supports up to 64K I/O ports. It has two main units, the Bus Interface Unit (BIU) for handling data transactions and the Execution Unit (EU) for executing instructions, and operates efficiently through pipelining. The memory is organized into segments, each 64KB, allowing for better data protection and relocation during execution.