Packages in Java act as containers that group related classes and interfaces together. There are several benefits to using packages including reusability of classes, avoiding naming clashes, and separating design from implementation. The Java platform provides some core packages like java.lang for fundamental classes and java.util for utility classes. Packages can be organized hierarchically and classes within a package are accessed using either their fully qualified name or by importing the package. Users can also define their own packages by specifying the package name and placing class files in the corresponding directory structure.