Azure Functions is a serverless compute service provided by Microsoft Azure that allows developers to run code in response to events without managing servers. It automatically scales based on demand, meaning you only pay for the resources you use when your code is executed. With Azure Functions, you can create small pieces of code, known as "functions," that can be triggered by various events, such as changes in data, HTTP requests, or scheduled timers. This makes it easy to build applications that respond quickly to user actions or system events while simplifying the development process.