Performance testing is a technique used to determine how a system performs in terms of responsiveness, speed, scalability, and stability by simulating real-world user loads. It helps prevent issues like slow performance, inconsistencies, and poor usability when many users access a system simultaneously. Popular tools for performance testing include HP Loadrunner and Apache Jmeter, with Loadrunner able to simulate hundreds of thousands of users and Jmeter being open source and designed for Java applications.