Payment channels
Lightning moves many payments away from Bitcoin's base layer into channels that record only opening and closing states onchain.
This reduces the amount of block space required for frequent, smaller payments.
Routing and security
Channels can connect through intermediary nodes using conditional payment mechanisms such as hashed timelock contracts.
Multisignature funding and revocation rules help prevent a participant from settling an outdated channel balance.
Benefits
Lightning can improve speed, lower fees and support payments that would be impractical on the base layer.
It can also provide a different privacy profile because individual routed payments do not all appear directly on Bitcoin's public chain.
Trade-offs
Users still need liquidity, channel management and reliable node connectivity, while large routing nodes may create concentration concerns.
Opening and closing channels also require normal Bitcoin transactions and fees.