AJAX allows for asynchronous data exchange between a browser and server to update parts of a web page without reloading the entire page. It uses a combination of technologies including JavaScript, HTML, CSS, XML, and the XMLHttpRequest object. AJAX enables features like interactive interfaces, reduced page reloads, and maintaining state across pages. However, it also has disadvantages like issues with the back button, difficulty indexing by search engines, and not working for browsers without JavaScript.