Shooting with a green screen involves filming a person or adding visual effects in front of a solid color. That color doesn’t have to be green there are blue screens as well. Then, by digitally removing or “keying out” that color, you can drop that scene onto the background of your choice in post-production. Removing the colored background is also referred to as “chroma keying.”

Green is usually used because it’s one of the furthest colors from skin tone.

They're used when the people making a video want to replace the background with something else. It's very hard to tell a computer where "a person" ends and "the background" begins against normal things, because our clothes might be the same color as background objects. Having one specific color nobody is wearing makes it easier to tell the computer "pick this one color and shades near it and replace those". (You can often see it mess up in Twitch streams if the streamer has a hat or something else that has a shade close to their background.)

Why green? Well, it used to be "blue screen". The difference is analog film vs. digital film. For whatever reason, analog film is better at recording shades of blue and digital film sensors are better at picking up shades of green. Since filming is almost exclusively done with digital equipment now, green screens are more common than blue screens. But it could be any color.

(I think the reason digital sensors pick up green better is they're synthetic. As in, digital sensors are tiny things we build. Our eyes pick up shades of green better than other colors, so we probably decided to design digital image sensors to mimic that. Analog film, on the other hand, is chemicals reacting with light so it's harder or impossible to make them model the human eye.)

During editing the computer will remove all the pixels above a certain green-ness threshold and replace them with whatever CGI background you want to use.

This rapidly automates the film editing process so that a human doesn’t have to manually crop each frame.

You can theoretically use any color value for this, but green is the most common because humans don’t come in green and don’t wear green very often.

Choose red or yellow and you risk editing out a person standing in slightly off lighting too. Choose blue and you’ll edit out everyone’s pants.

From what I understand, green is easily distinguished from skin/human colours by computers. It works by telling the computer to remove one specific colour from the image and replace it with transparent texture

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Chroma keying has been around long before computers and digital sensors were used to create television. Analog filters were tuned to essentially look for a pure colour and were able to swap the color with a desired background.

Tom Scott has a good video on the subject. https://youtu.be/msPCQgRPPjI