NLP stands for Natural Language Processing which is a field of artificial intelligence that helps machines understand, interpret and manipulate human language. The key developments in NLP include machine translation in the 1940s-1960s, the introduction of artificial intelligence concepts in 1960-1980s and the use of machine learning algorithms after 1980. Modern NLP involves applications like speech recognition, machine translation and text summarization. It consists of natural language understanding to analyze language and natural language generation to produce language. While NLP has advantages like providing fast answers, it also has challenges like ambiguity and limited ability to understand context.