In Java, a variable is a named memory location that stores data for use during program execution. Variables allow programs to store, retrieve, and manipulate data dynamically. They are declared by specifying a data type followed by a variable name and can be initialized with a value at the time of declaration. Java variables are case-sensitive and must start with a letter, dollar sign (`$`), or underscore (`_`); they cannot start with a digit or be a reserved keyword. Understanding variables is fundamental to Java programming, as they enable data storage and manipulation within applications.