A traditional tank-style water heater stores hot water at a preset temperature, and continuously heats the water 24/7 regardless is it is needed it or not. Tankless technology only heats water on demand. When the faucet is opened, the water flows through the tankless water heater, which heats it to the temperature you’ve digitally set. When the faucet is closed, the tankless water heater goes to a standby mode.