AWS IoT TwinMaker is a service that simplifies the creation of digital twins for real-world systems. It enables developers to connect disparate data sources, model physical systems accurately, and create immersive 3D visualizations of operations. The video demonstrates how a digital twin of a cookie factory can be built using AWS IoT TwinMaker, combining 3D models with real-time data to improve efficiency and performance. It showcases features like the 3D scene viewer, hierarchy panel, and data visualization capabilities. The video also walks through the key steps of creating a digital twin, including defining components, creating entities, and integrating with monitoring applications.