Threads are lightweight processes that improve application performance through parallelism. Each thread has its own program counter and stack but shares other resources like memory with other threads in a process. Using threads provides advantages like lower overhead context switching compared to processes and allows parallel execution on multi-core systems. There are two types of threads - user level threads managed by libraries and kernel level threads supported by the OS kernel. Threads have a life cycle that involves states like new, ready, running, blocked, and terminated.