InfluxDB is a time series database that specializes in handling time series data, which is indexed by time. It's optimized for reading and writing data with less performance consideration for updating or deleting data. InfluxDB can be used to monitor application performance, store metrics from applications like request processing, memory consumption, and response time. To use InfluxDB with a Ruby on Rails application, Docker needs to be installed and set up, and the latest version of Ruby on Rails must be installed. An InfluxDB client is instantiated using the `influxdb-client` gem, and subscriptions are set up for various events such as process_action.action_controller, render_template.action_view, sql.active_record, and instantiation.active_record. Once instrumentation is set up, metrics can be generated by running the app, and data can be visualized in the InfluxDB dashboard using Flux queries.