Thumb-2 is a technology developed by ARM Holdings that enhances the efficiency of code execution in embedded systems. It is a part of the ARM architecture and allows for a more compact representation of instructions, which helps save memory and improve performance. This instruction set is particularly beneficial for devices with limited resources, such as smartphones, tablets, and IoT devices. By using Thumb-2, developers can create applications that run faster and consume less power, making it an essential feature for modern computing in small form factors.