Slim3 is a Java framework for developing applications on Google App Engine. It is optimized for GAE and allows building applications using an MVC framework. Slim3 provides features like fast deployment, hot reloading, and type-safe queries. To set up a Slim3 project, install Java and Eclipse plugins, create a new Slim3 project, module, and entry point class, and uncomment configuration in web.xml to enable the GWT service servlet. The project can then be run as a web application.