Cloud computing involves connecting large numbers of computers through a network like the Internet to share resources. It provides computing services through different models: Software as a Service (SaaS) allows users to access and use cloud-based applications without installing them; Platform as a Service (PaaS) offers resources for building and hosting apps; Infrastructure as a Service (IaaS) provides basic storage, networking, and computing resources. Cloud computing offers advantages like lower costs, improved performance, and increased storage capacity and reliability compared to local hardware, but also risks like potential downtimes if the Internet is offline and security concerns about sensitive data held by third parties.