When you are an employee, your employer withholds income tax from every paycheck and sends it to the IRS for you. When you are self-employed, run your own business, or have significant income with no withholding, nobody is doing that on your behalf, and the IRS does not wait until April to collect it.
Who this applies to
Generally, if you expect to owe $1,000 or more in federal tax for the year after subtracting withholding and credits, you are expected to pay estimated tax during the year rather than in one lump sum at filing time. That commonly covers self-employed individuals, sole proprietors, partners, S-corp shareholders, and anyone with substantial income that is not subject to withholding.
How it is paid
Estimated tax is paid in four instalments across the year rather than one, roughly in mid-April, mid-June, mid-September, and mid-January of the following year. The exact dates shift slightly year to year around weekends and holidays. Each payment is an estimate of what you will owe for that period, calculated from your income, deductions and credits.
What happens if you skip it
Underpaying, or not paying at all, can trigger an underpayment penalty even if you pay the full balance when you file. The penalty is calculated on how much was owed and how late it arrived, not just whether the final return was accurate. Catching up mid-year is better than waiting for the return to sort it out.