A compiler is a program that translates source code written in one language into an equivalent target code in another language. Source code is usually written in a high-level language like C++ or Java, while target code is in machine language or assembly language. Compilers allow programmers to write code in languages that are easier for humans to read and write compared to machine language. Developing compilers involves understanding how to break down and analyze source code, generate equivalent target code, and address complex issues like language design and parsing algorithms.