DigitalOcean is a cloud service provider that offers affordable and powerful servers, which helped the startup AudioBox.fm reduce costs and increase performance. The company initially used Amazon EC2 for hosting but faced issues with CPU steal time, which led to a significant drop in performance and increased costs. After researching and testing different options, they discovered DigitalOcean, which provided them with an inexpensive and powerful server that could handle their traffic without sacrificing performance. This switch allowed the team to focus on developing new features and improving the overall architecture of the platform.