Kafka Streams is a lightweight stream processing library included in Apache Kafka since version 0.10. It provides a simple yet powerful API for building stream processing applications. The API uses a domain-specific language that allows developers to define stream processing topologies where data from Kafka topics acts as input streams and can be transformed before writing the results to output topics. The library handles common stream processing tasks like state management, windowing, and fault tolerance using Kafka's distributed and fault-tolerant architecture.