Virtual Private Cloud (VPC) peering is a networking connection between two VPCs that enables private IP address communication. It offers improved security, cost savings on network transit costs, and flexibility for services not requiring public Internet access. CockroachDB Dedicated allows users to set up VPC peering with GCP or AWS PrivateLink connections. This enhances user experience by eliminating the need for allowlisting IP addresses within CockroachDB Dedicated before connecting.