Placement Groups in AWS are a logical grouping of EC2 instances, allowing them to be placed in an isolated location within the AWS infrastructure. This helps to ensure that applications running on these instances have access to exclusive resources for improved performance, stability, and scalability. Placement groups are also used for multi-node clustering solutions such as Hadoop and Apache Spark. When creating a placement group, users must specify its type - either ‘cluster’ or ‘partition’. With cluster placement groups, all instances must be of the same instance family; while with partition placement groups they can include multiple instance types. Placement Groups provide higher network performance by offering lower latency between the group's members compared to other EC2 instances located elsewhere in the same data center.