"How the bitcoin lightning network works:

Think of Bitcoin’s main blockchain as a highway, and the Lightning Network as a series of side streets that reduce the highway's congestion from smaller transactions.

First, two parties who wish to transact with each other set up a multi-signature wallet (which requires more than one signature to enact a transaction). The wallet holds some amount of bitcoin. The wallet address is then saved to the Bitcoin blockchain, setting up the bidirectional payment channel.

The two parties can now conduct an unlimited number of transactions without ever touching the information stored on the blockchain. With each transaction, both parties sign an updated balance sheet to reflect how much of the bitcoin is stored in the two wallets.

Once both parties finish transacting and close out the channel, the resulting balance is registered on the blockchain. In the event of a dispute, both parties can use the most recently signed balance sheet to recover their share of the funds.

It is not necessary to set up a direct channel to transact on the Lightning Network – you can send payments to someone via channels with people with whom you are connected. The network automatically finds the shortest route. The network's goal is to allow users to make smaller payments without transaction fees or delays."

https://www.coindesk.com/learn/what-is-bitcoins-lightning-network/