AWS Lambda is a serverless compute service that enables developers to run their code without managing underlying infrastructure. It allows for efficient use of resources, as it automatically scales up or down based on demand. Lambdas are useful in creating more interactive and real-time experiences across the web, such as chat applications, social media platforms, games, and collaborative spaces. By integrating with WebSockets, Lambda functions can handle real-time communication between devices and backend services, while Pub/Sub brokers like Ably manage connections and data distribution. This combination of technologies provides a scalable solution for real-time interactions in various applications.