Kafka Streams is a client library for building applications and microservices, where the input and output data are stored in Kafka clusters. It provides a high-level, functional programming model to process data streams, allowing developers to create robust, stateful stream processing applications. Kafka Streams simplifies the development of real-time applications and enables features like event-time processing, windowed joins, and exactly-once semantics. This library integrates seamlessly with existing Kafka infrastructure, making it an efficient choice for building scalable, fault-tolerant streaming applications.