Dynamic Link Libraries, or DLLs, are files used in Microsoft Windows that contain code and data which multiple programs can share. This allows software applications to use common functions without needing to include the entire code in each program, saving space and improving efficiency. When a program runs, it can load the necessary DLL files into memory, enabling it to access the shared functions. This modular approach not only reduces redundancy but also makes it easier to update and maintain software, as changes to a DLL can benefit all programs that use it without requiring individual updates.