AJAX stands for Asynchronous JavaScript And XML. It allows web pages to be updated asynchronously by exchanging data with a web server behind the scenes, without interfering with the display and behavior of the existing page. AJAX uses XMLHttpRequest object to request data from the server and JavaScript is used to display or use the data. The steps include creating an XMLHttpRequest object, making a request to the server using open() and send() methods, monitoring the response using onreadystatechange event handler, and updating the webpage with the response data.