State Channels are a technology that allows two parties to conduct multiple transactions off-chain, recording only the initial and final state on the main network. This reduces the load on the blockchain and allows transactions to be performed faster and cheaper. For example, if two users exchange cryptocurrency multiple times, only the final amount will be recorded on the blockchain.
Operations on state channels start when one party opens a channel through a smart contract, under which both parties make a deposit. After that, they can conduct transactions between themselves off-chain. When the interaction is completed, the channel is closed, and only the final result is recorded on the blockchain. This solution is especially useful for micropayments and applications where speed and low fees are of paramount importance.