VPC Peering is a secure network connection between two Virtual Private Clouds (VPCs) allowing private communication using private IPs without going over the internet. It offers low latency, high bandwidth, cost-effectiveness, improved security, and easier resource sharing. Setting up VPC Peering involves creating VPCs, attaching subnets, creating internet gateways, configuring route tables, and checking connectivity through VPC Peering Connection status, route tables, Network ACLs, and testing the connection with EC2 instances. The process ensures a secure and efficient private network link between VPCs.