Vagrant is a tool for building and distributing virtual development environments. It allows users to create virtual machines and configure their software stacks in an automated, reproducible way. Key features include automated provisioning, networking, SSH access, and treating infrastructure as code that can be version controlled. The demo shows how to install Vagrant, add base box images, initialize a Vagrantfile to define VMs, and run common commands to launch, SSH into, halt, and destroy VMs.