Tesseract is an open source OCR engine originally developed between 1985-1994 and now sponsored by Google. It uses techniques like adaptive thresholding and character segmentation graphs to recognize text despite challenges like non-straight baselines and varying word spacing. Tesseract represents characters as histograms of gradients to classify them using a trained classifier. Implementing real-time OCR with Tesseract on Android requires overcoming limitations of mobile devices through techniques like multi-threading for camera and processing.