A "tankless" water heater, also known as an on-demand water heater, heats water directly without the use of a storage tank. When you turn on the hot water tap, cold water travels through a pipe into the unit, where it is heated by either gas or electricity. This means you have a continuous supply of hot water, as long as the unit is functioning properly. Unlike traditional water heaters that store a limited amount of hot water, tankless systems can provide hot water for multiple outlets simultaneously. This efficiency can lead to energy savings, as they only heat water when needed, reducing standby energy loss associated with traditional water heaters.