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What is a tankless water heater, and what are the advantages?

A whole home tankless water heater is wall-mounted, and heats water as it is needed rather than storing it in a tank, as in conventional systems. A tankless saves storage space so is great for compact homes. Further, it doesn’t expend energy to continuously heat hot water when it’s not needed, so is much more energy-efficient than conventional hot water heaters, substantially trimming down heating bills. Finally, a tankless supplies as much hot water as needed, so never runs out like a conventional water heater.

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What is a tankless water heater, and what are the advantages?