Cgroups improve database performance by associating a dedicated set of CPUs and memory to a database instance, limiting each instance to only those resources. The setup_processor_group.sh script is used to create cgroups on Linux systems. To bind a database instance to a cgroup, the PROCESSOR_GROUP_NAME parameter must be set to the cgroup name and the instance restarted. Best practices include configuring cgroups out of CPU threads from minimum cores/sockets and creating cgroups with at least 2 CPU cores.