Ajax allows web pages to be updated asynchronously by exchanging data in the background without interfering with the display and functioning of the page. It uses a combination of technologies like HTML, CSS, JavaScript, XML, and XSLT along with the XMLHttpRequest object. This allows parts of a page or even whole sections to be updated without reloading, improving interactivity and reducing bandwidth usage. However, dynamically updated content also poses challenges for bookmarking, back button usage, and search engine crawling. Developers must also address security concerns and learn new testing and coding methods for Ajax applications.