Layer 2s batch many transactions and settle them to a layer-1 as one compressed record, cutting cost per transaction dramatically while still anchoring to the base chain's security.
The main families are the optimistic-rollup and the zk-rollup. Both keep funds provably recoverable from L1 data in theory; in practice most also have a sequencer and upgradeable contracts, which are trust assumptions you should read before parking size there.
Example: a swap costing $12 on a congested L1 might cost $0.05 on an L2. The catch is the exit: withdrawing from an optimistic rollup can take about seven days unless you pay a liquidity provider to front the funds at a discount.
Related: rollup, optimistic-rollup, zk-rollup, sequencer