State Channels were invented in 2015 by Joseph Poon and Thaddeus Dryja as the basic block of the Bitcoin Lightning Network, enabling fast, affordable and private micropayments as a Layer 2 on top of Bitcoin’s Layer 1.
The Layer 1, i.e. posting transactions directly on the blockchain, is always simpler and safer than any Layer 2. But the Layer 2 of State Channels allows for more transactions, faster, and more private, than is possible on the Layer 1.
Furthermore, unlike many other Layer 2 solutions (i.e. sidechains and bridges), State Channels does not require any additional trust assumption compared to the Layer 1: it only requires trusting the underlying Blockchain, and trusting one’s own computing infrastructure, both of which are already prerequisites for exchanging digital assets on Layer 1.
Compared to Layer 1, though, a State Channel do require its participants to lock some funds in the channel, and to maintain an active and regular presence on the network; it also only works between a relatively small set of agreeing participants. State Channels are therefore not suitable for every use by every user.