Handoff allows for seamless transfer of user activities between Apple devices associated with the same iCloud account. It uses Bluetooth LE and user activity objects stored in NSUserActivity to transfer information about tasks between nearby, signed-in devices. App developers must implement NSUserActivity and its delegate methods to create and handle user activity objects to enable Handoff functionality for their apps. Common data types like documents can often be handled automatically, while custom activities require setting up activity objects and streams of data between devices.