Transaction isolation levels define how database transactions interact with each other, particularly regarding data visibility and consistency. They help manage the trade-off between performance and accuracy by controlling how changes made by one transaction are visible to others. The main levels are Read Uncommitted, Read Committed, Repeatable Read, and Serializable, each offering different balances of isolation and concurrency. Each isolation level addresses potential issues like dirty reads, non-repeatable reads, and phantom reads. For example, Read Uncommitted allows the highest level of concurrency but risks reading uncommitted changes, while Serializable provides the strictest isolation, ensuring complete accuracy at the cost of performance.