Inheritance in Java allows classes to inherit properties and behaviors from other classes. This encourages code reusability. The extends keyword establishes inheritance, allowing subclasses to access members of the superclass. Examples demonstrate single inheritance with an Employee superclass and Programmer subclass, multilevel inheritance with classes inheriting from grandparents and parents, and hierarchical inheritance with subclasses of the Animal superclass like Dog and Cat. Multiple inheritance is not directly supported in Java to avoid the "diamond problem" of ambiguous inheritance relationships.