The 8086 microprocessor, introduced by Intel in 1976, is a 16-bit processor with a powerful instruction set and supports two modes of operation - maximum and minimum mode. Its architecture consists of a Bus Interface Unit (BIU) and an Execution Unit (EU), and it utilizes an instruction queue to enhance execution speed. Memory is organized into segments, and it features a 16-bit flag register with various conditional and control flags to manage processor state and execution flow.