The Command palette is a dialog that shows the commands available in the current context. You can open it by pressing Ctrl+K or clicking on the Command Palette option of the Main menu.
Not all commands are shown, those that do not apply to the current context (active view, active editor or active dialog) are omitted.
In the dialog, you can select a command and execute it by pressing the Execute button.
Commands are contributed to the workbench, by plugins.
You can change the key bindings of the commands in the Keyboard settings.