Monitoring Lambda functions in an SST application can be easily achieved by integrating Sentry, which provides real-time error tracking and performance metrics for entire full-stack apps. By following a few simple steps, developers can set up Sentry to monitor their Lambda functions, including execution duration and transactions per minute, allowing them to identify issues before going into production. With the integration of Sentry with SST, developers can gain valuable insights into their app's performance and errors, making it easier to optimize and improve their application.