Torricelli's law states that the speed of fluid flowing out of an opening in a container is proportional to the square root of the height of the fluid above the opening. This principle is derived from the conservation of energy and applies to ideal fluids, meaning those that are incompressible and have no viscosity. According to the law, if a hole is made at the bottom of a tank filled with liquid, the fluid will exit the hole with a velocity that increases as the height of the liquid above the hole decreases. This relationship helps in understanding fluid dynamics and is used in various engineering applications.