A URLStreamHandler is a class in Java that is responsible for handling the communication between a URL and its associated protocol. It defines how to open a connection to a resource identified by a URL, allowing developers to create custom protocols beyond the standard ones like HTTP or FTP. When a URL is created, the URLStreamHandler determines how to interpret the URL's format and manage the data transfer. This enables applications to interact with various types of resources seamlessly, making it easier to extend functionality and support new protocols as needed.