Telnet is a protocol that enables one computer to connect to another computer remotely. It uses a client-server model, with the local computer running the telnet client and the remote computer running the telnet server. Telnet allows the user to access and interact with the remote computer through their local computer. Commands are prefixed with IAC and can be sent in one of three modes: default, character, or line mode. Telnet is used for remote login while FTP is used for file transfer between systems.