JVM arguments are command-line parameters passed to the Java Virtual Machine when launching the server. They allow you to customize the JVM's behavior, such as setting the maximum heap size (-Xmx), specifying the Java version, or enabling debugging options.

JVM arguments are crucial for fine-tuning the Minecraft server's environment. Using arguments like -Xmx (maximum heap size) and -Xms (initial heap size) is essential for preventing out-of-memory errors and improving server performance. Other arguments can control garbage collection and debugging behavior.