Istio is an open platform that connects, manages, and secures microservices. It moves network complexity out of applications by handling routing, access control, rate limiting, metrics and tracing, and security. These capabilities help address challenges that arise from breaking up software into independent microservices, such as increasing complexity, timeouts, retries, and fault injection. Istio demonstrates these features through a marketplace demo of independent services like an Oauth service, cart, and payment gateway. It also provides distributed tracing and visualizes services through a service graph.