The Camera2 API, introduced in Android 5.0 (Lollipop), significantly enhances camera functionality compared to the deprecated Camera1 API, offering features like access to multiple cameras, manual controls, and burst mode. It requires a new, asynchronous pipeline for managing camera interactions and settings, which improves performance but can introduce complexities due to vendor implementations. While building apps with Camera2 is generally faster and supports advanced features, developers must account for device fragmentation and possible limitations across different models.