A tankless water heater is a type of water heating system that heats water on demand, rather than storing it in a large tank. When you turn on a hot water tap, cold water flows through the unit, where it is heated by either gas or electricity. This means you can enjoy a continuous supply of hot water without waiting for a tank to refill. Unlike traditional water heaters, which can run out of hot water, tankless models are more energy-efficient because they only heat water when needed. They are compact and can be installed in smaller spaces, making them a popular choice for homes looking to save space and energy.