Decision trees are a machine learning technique that use a tree-like model to predict outcomes. They break down a dataset into smaller subsets based on attribute values. Decision trees evaluate attributes like outlook, temperature, humidity, and wind to determine the best predictor. The algorithm calculates information gain to determine which attribute best splits the data into the most homogeneous subsets. It selects the attribute with the highest information gain to place at the root node and then recursively builds the tree by splitting on subsequent attributes.