Google App Engine is a web application development environment that runs applications on Google's infrastructure. It allows applications to use Google's scalable hosting and requires no manual administration of servers. Key features include automatic scaling, data storage, and limits on things like storage space and page views. The environment also has limitations like not being able to write to the file system or run background processes. Google App Engine is part of Google's strategy to move more services and applications online which could lower costs and increase opportunities for small businesses and web applications.