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Trading bots are just programs that buy and sell assets at the right time on your behalf. They are pieces of code that are designed to trade for you. Normally, this bot will try to interpret market data, look at price movements and react accordingly based on rules which the bot creator has defined. Millions of people use algorithmic trading bots to control their trading activities whilst sitting back and (hopefully) watching their profit grow.
Trading bots work by communicating directly with exchanges and placing orders automatically. They decide what to do or which action to take by monitoring market prices and movements as well as acting on your preset rules. An exchange user provides access to the trading bot by giving the bot their API keys. Two keys are used to tell the exchange that a bot has been allowed by you to access your account and trade on your behalf.