'XaaS' stands for 'Anything as a Service', which is a cloud service model that delivers various services over the Internet. This includes software, infrastructure, platform, and even specific applications as services. The operational model works by providers hosting applications and resources in the cloud, allowing businesses to access them on-demand without managing physical infrastructure. This flexibility enables companies to pay only for what they use, scale resources efficiently, and innovate rapidly without the burden of extensive physical setups.