Netlify simplifies the process of handling forms in web development by utilizing static HTML files at build time, which do not require extra API calls or server-side logic. This feature can be utilized with SvelteKit by creating a prerendered route and using an HTML form. To set up this feature in a new SvelteKit project, one needs to run specific commands such as `npm init svelte@next your-site-name` and install the adapter-netlify package. The Netlify TOML file is used to hold build configurations, including specifying the command to be executed during builds and where to publish static files. In SvelteKit, the routes directory contains page files that can be either `.svelte` or `.server.js`, with the latter being for server-side rendering and the former for client-side rendering. A form is set up using standard HTML elements with specific attributes such as `data-netlify` and `netlify-honeypot`. The form submission data is then displayed in the Netlify dashboard under the Forms tab.