Capistrano is an open source tool that automates deploying web applications to multiple servers. It allows deploying new versions of an application in a transactional way that can rollback changes. Capistrano handles tasks like copying code, database migrations, and restarting services. It works by creating a new release directory on servers, pulling code from a repository, and symlinking the current version. Capistrano configurations can define stages, servers, and custom tasks for deploying applications.