Fragments are modular sections of an activity that have their own lifecycle and can be added or removed dynamically. Fragments are embedded within activities and use the activity's lifecycle. They allow building reusable UI components and supporting multi-pane layouts on larger screens. Fragments should be used when building multi-pane UIs or when wanting to reuse certain UI components across multiple activities. The document provides details on how to define fragments in XML layouts, add them programmatically, communicate between fragments and activities, and best practices for using fragments.