OpenCV is a Python library used for computer vision tasks like image classification, object detection, and face recognition. It processes images to understand their content. When analyzing images, OpenCV performs tasks like object classification to categorize objects, object identification to recognize specific instances, and edge detection using techniques like Canny edge detection. Key computer vision algorithms in OpenCV include SIFT for keypoint detection, template matching for finding areas of an image that match a template, and Viola-Jones for real-time object detection. OpenCV is useful for applications like driverless cars that require visual understanding of the environment.