Protocol buffers are a flexible, efficient, and automated mechanism for serializing structured data that is simpler, faster, smaller and generates access classes compared to XML and JSON. It works by defining message types in .proto files that can then be compiled to generate data access classes in various languages like Java, C++, Python and more. Many large companies like Google, Twitter and Oracle use protocol buffers for internal APIs, queue systems and database objects due to its performance advantages over other data formats.