A template engine is a software tool that helps developers create dynamic web pages by separating the presentation layer from the business logic. It allows for the use of templates, which are pre-defined HTML structures that can be filled with data. This makes it easier to manage and update the design of a website without altering the underlying code. Commonly used in web development, template engines like Mustache, Handlebars, and EJS enable developers to insert variables and control structures directly into HTML. This results in cleaner code and a more efficient workflow, as changes to the layout can be made in one place while the data can be updated independently.