Cloud computing provides on-demand access to a shared pool of computing resources with essential characteristics like rapid elasticity and broad network access. It includes service models such as Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS), offering various tools and advantages like scalability and cost reduction while also posing some challenges like reliance on internet connectivity. Providers like Amazon Web Services (AWS) offer a range of tools for computation, storage, networking, and security to facilitate cloud applications.