EIP-1559 is an Ethereum protocol upgrade that was activated in August 2021 and introduced significant changes in the way Ethereum processes and calculates transaction fees. This upgrade introduced a fee-burning mechanism and replaced the previous gas market, where network participants bid against each other to have their transactions included in blocks.
The new model established by EIP-1559 consists of a base fee that changes algorithmically in relation to the prior block usage, and a priority fee that is set by the network participant to prioritize their transaction's inclusion. The base fee is relatively stable from block to block most of the time, and the block producer receives the priority fee, while the base fee is entirely burned.
The primary objective of EIP-1559 was to provide greater certainty regarding fee levels to network participants and to introduce a hard sink and source of deflation, which changed Ethereum's cryptoeconomics. Additionally, several other layer one blockchains have also implemented similar models to EIP-1559 in recent years.