AWS Lambda is a serverless computing service that runs code in response to events without managing servers. In IoT contexts, Lambda often processes data streams from AWS IoT Core. It enables real-time transformations, filtering, and integrations with other AWS services. Lambda supports many programming languages and scales automatically based on demand. Its pay-per-use model makes it cost-effective for event-driven IoT workloads. Together with AWS IoT Core, Lambda allows developers to build responsive, cloud-native IoT applications.