Exception handling in Java allows programs to handle errors and unexpected situations gracefully. There are three main components to exception handling: try, catch, and finally. The try block contains code that might throw exceptions. The catch block catches and handles specific exceptions. The finally block contains important cleanup code that always executes whether an exception was thrown or not. Exceptions can be handled for different exception classes and with the throw and throws keywords. User-defined exceptions can also be created by extending the Exception class. Exception handling prevents programs from crashing and allows specific handling for different error situations.