The serverless offline plugin for Node.js allows developers to emulate AWS Lambda and API Gateway on a local machine, making it possible to test and debug their serverless applications without deploying them every time. This plugin starts an HTTP server locally to handle request lifecycles and invoke handlers, allowing developers to work at their own pace and freely make changes to their code without worrying about impacting the rest of their team. To set up serverless offline, developers need to include the serverless-offline Node.js package in their existing application and add a plugin section to their serverless.yml file. Once installed, they can start a local server that emulates AWS Lambda and API gateways on their local machine using the `serverless offline` command. The plugin also provides various options for configuring the local server, such as setting the HTTP port or enabling HTTPS. Additionally, developers can use the Fauna database with serverless offline to create a flexible and developer-friendly transactional database delivered as a secure and scalable cloud API.