OK, so the simplest way to understand is to first know about the previous generation.
U2F keys are designed to be used alongside a username and password, as a more secure replacement for phone apps showing 6-digit codes.
In U2F the key has a hardware 'secure element' where secrets can't be extracted, even if you plug it into a compromised machine. You get a separate public/private key pair for every account and website (so it can't be used to track you between websites) and that key pair can be used to authenticate with the website. A physical button has to be pressed to authenticate, keeping it secure even if an attacker has control over your keyboard and mouse. The browser integration takes care of letting the USB key know which website is asking to authenticate. U2F keys have to be used alongside a username and password.
For a variety of reasons U2F keys never really took off. Partly cost, partly the 'what if I lose it' issue, partly lack of uptake by websites, partly difficulty using them on mobile, partly competition from 'log in with google' type systems.
So the trade group behind U2F said "Hey, maybe we could just emulate the hardware secure element in the smartphone's OS? And while we're at it, we could save the username, and use fingerprint/faceid instead of a password, eliminate that tedious button press, and automatically back up the public/private keypairs to the cloud". They kept a USB option about for the sake of tradition, but it's on life support.
So that's the mental model of a Passkey: It's like an impossible-to-clone USB hardware secure element that does challenge-response authentication to websites. Except it's emulated in OS software, and is no longer impossible to clone.
Another way of thinking of it is: It's very similar to using the 'Log in with Google' / 'Log in with Apple ID' buttons you see on many websites, you're authenticating to a service by proving you have access to a cloud account. The implementation details in the background are very different, but the result is broadly the same.
