The key functionality of a serverless architecture is to allow developers to build and deploy applications without having to manage the underlying server infrastructure. In this model, cloud providers handle server management, scaling, and maintenance. Developers can focus on writing code and deploying microservices that respond to specific events or triggers. This approach can lead to significant cost savings, as users pay only for the actual compute time used by their code. Serverless architecture promotes agility, simplifies the development process, and enhances scalability for modern applications.