Terraform modules are collections of standard configuration files in a dedicated directory that encapsulate groups of resources dedicated to one task, reducing the amount of code needed for similar infrastructure components. They can be stored locally or remotely and can be versioned for control over module changes. Meta-arguments allow customization of Terraform behavior when parsing modules. Modules outputs are declared within the module and accessed by calling their values in other resources. Testing is crucial to ensure proper functioning, and automated testing is available through Spacelift. Terraform modules solve problems such as code repetition, lack of code clarity, lack of compliance, and human error.