DBSCAN is a density-based clustering algorithm that groups together densely populated areas of points. It uses two parameters: minPts, the minimum number of points required to form a dense region, and eps, the maximum distance between two points for them to be considered neighbors. The algorithm iterates through points, treating points with more neighbors than minPts as core points and assigning neighbors within eps distance to the same cluster. Points not assigned to clusters are considered noise. Unlike K-means, DBSCAN can find clusters of arbitrary shapes, does not require specifying the number of clusters, and is less sensitive to outliers.