Ant Colony Optimization (ACO) is a heuristic method inspired by the foraging behavior of ants, used to solve optimization problems like finding the shortest path and the traveling salesperson problem. The algorithm mimics ants' behavior of laying down pheromone trails to communicate and influence each other's paths, allowing for adaptability in dynamic environments. ACO advantages include continuous operation and real-time adaptation, making it useful in fields like network routing and urban transportation.