A service mesh is a dedicated infrastructure layer that controls service-to-service communications over a network, enabling microservices to communicate with and sometimes across each other. It works by dividing into two planes - the data plane and the control plane. The data plane provides features like service discovery, resilience, observability, and security for the microservices, while the control plane defines policy and ensures the data plane follows that policy. A service mesh utilizes a proxy instance called a sidecar to manage each service's traffic. It can be used in conjunction with an API Gateway to provide comprehensive communication management and is essential for managing complex communication between microservices within a cluster.