The Held-Karp algorithm is a dynamic programming solution used to solve the Traveling Salesman Problem (TSP), which seeks the shortest possible route that visits each city exactly once and returns to the origin city. It efficiently computes the optimal solution by breaking the problem into smaller subproblems, using previously computed results to build towards the final answer. This algorithm is particularly significant in understanding Hamiltonian cycles, as it helps in determining the minimal cost Hamiltonian circuit in a complete graph.