Environments are docker images that can be attached to classes and workspaces and are used to compile and run the code contained in a workspace.
The docker containers must contain all of the dependencies required to build the code. Before the container is run all of the workspace files will be copied under the /workspace directory. The docker container must compile and run the code at the images entry point. STDOUT and STDERR will be captured from the container and returned in real-time.
An example environment can be found here.
For more information on Docker see the official Docker documentation.