Winglets reduce the small tornados formed at the end of an aircraft’s wing that produce drag. They also deliver a significant improvement in a wing’s lift-to-drag ratio, compared with a simple wing extension.
They were designed by NASA in 1976 shortly after the energy crisis sent fuel prices skyward and are particularly suited to long-haul aircraft, making them more fuel efficient and allowing access to tighter airport gates.
Although complex to design and implement (especially when retrofitted to an existing wing) they have fundamentally changed the shape of wing design.