Google App Engine is a PaaS that allows developers to build and host web applications on Google's infrastructure. It provides automatic scaling and simulates a production environment through its SDK. However, applications must comply with App Engine's rules, including a read-only filesystem, 30 second response times, and no socket connections or processes. Data is stored in Google's distributed Datastore, which uses entities instead of tables and does not support joins, aggregation, or transactions across entity groups. To work within these limitations, developers must change their approach to focus on the Datastore's strengths like simplicity and denormalize their data models.