As payments are exchanged, the channel balance is updated between the two participants without requiring additional on-chain transactions. These off-chain updates are exchanged and signed by both parties, ensuring that the most recent balance can be settled on-chain at any time.
If either party wants to close the channel, the most recent balance state is broadcast to the Bitcoin blockchain. This is the channel closing, and it's the only other point recorded on-chain.
The process is secured by smart contracts known as Hashed Timelock Contracts (HTLCs), which prevent either party from settling with an outdated balance.
As long as the channel remains open and has sufficient liquidity, the two participants can transact instantly and indefinitely, without incurring on-chain fees.