Servlets are Java programs that extend the functionality of a web server. They allow for dynamic web page generation in response to client requests. Servlets offer advantages over CGI programs like improved performance since they do not create a new process for each request. The lifecycle of a servlet involves init(), service(), and destroy() methods. Servlets can be created and tested using the Tomcat servlet container. Security restrictions apply to untrusted servlets to prevent potentially dangerous operations, similarly to applets.