NPM, or Node Package Manager, is a tool used for managing packages in the Node.js ecosystem. It allows developers to easily install, share, and manage libraries and tools that enhance their applications. With a vast repository of packages, NPM simplifies the process of adding functionality to projects. NPM also helps in managing project dependencies, ensuring that the correct versions of libraries are used. It provides a command-line interface for installing packages, updating them, and even publishing new packages for others to use. This makes it an essential tool for modern web development.