For most of its history Java was strictly object-oriented: to pass behaviour around, you wrapped it in an object, typically a verbose anonymous class. Java 8 changed this profoundly by adding lambda expressions, a concise syntax for treating a piece of behaviour as a value you can pass to methods, store in variables, and return. A lambda is essentially an anonymous function: parameters, an arrow, and a body.
Lambdas work hand in hand with functional interfaces, interfaces with exactly one abstract method, which are the types lambdas implement. The standard library provides a rich set in java.util.function (Predicate, Function, Consumer, Supplier, and more), and these together are the foundation of the Streams API and the functional style that dominates modern Java.
Understanding lambdas and functional interfaces matters because they are the vocabulary of contemporary Java: stream pipelines, event handlers, and countless library APIs are expressed in terms of them. Grasping that a lambda is just a compact implementation of a single-method interface, and learning the standard functional types, unlocks the declarative, behaviour-as-data style that makes modern Java code shorter and clearer.