AWS Lambda is a serverless computing service that enables users to run code without managing servers, automatically scaling based on demand and charging only for the compute time used. Key features include automated administration, fault-tolerance, and integrated security, while also allowing the creation of customized back-end services. Limitations exist regarding disk space, deployment package size, memory, execution timeout, and payload size, but it is suitable for applications like serverless websites, document conversion, and real-time data processing.