A microprocessor is a central processing unit made from integrated circuits containing millions of components, and it operates by fetching, decoding, and executing instructions. Microprocessors are widely used in home devices like smart TVs and smartwatches to enhance performance and allow multitasking, though they also have limitations such as data size limits and sensitivity to heat. Various home appliances, including PCs, refrigerators, and smart home devices, utilize microprocessors to improve functionality.