PHP 7 provides major performance improvements over previous versions through a refactored engine. It focuses on optimizing core functions and data structures like ZVAL and HashTable to reduce CPU and memory overhead. Some key optimizations include using an Abstract Syntax Tree, improving integer handling, making function calls more efficient, and enhancing the memory manager. Benchmark tests show PHP 7 can be over 5 times faster than PHP 5 for simple tests and around 2 times faster for real-world applications like WordPress. The goal is to achieve a new level of PHP performance while maintaining 100% compatibility.