Spring Data Neo4j is used for domain modeling, allowing developers to map entities and relationships into Neo4j nodes and connections. A Person entity is commonly used in applications and can be annotated with necessary Spring Data Neo4j annotations to interact with the database. The use of a repository enables retrieval of instances from the database, while a controller exposes the data to the web. The standard class diagram provides a visual representation of the domain model, making it easier for developers to understand and implement.