Lambda architecture is a data-processing architecture designed to handle massive quantities of data by taking advantage of both batch and stream-processing methods. It aims to balance latency, throughput, and fault-tolerance by using batch processing for comprehensive data views and real-time stream processing for immediate data insights. The architecture consists of three layers: Batch Layer for processing large volumes with high accuracy, Speed Layer for real-time processing with low latency, and Serving Layer for indexing and serving queries. This approach enables systems to handle both historical analysis and real-time decision making in big data environments.