The evaporator coil is the indoor heat exchanger inside (or just above) the air handler. Low-pressure liquid refrigerant enters the coil and boils into vapor as it absorbs heat from the warm indoor air being pushed across it by the blower fan.
The same cold-coil-meets-warm-humid-air interaction also removes moisture: water vapor condenses on the coil and drains away via the condensate pan and drain line. This is why every AC is also a dehumidifier.
Common failure modes: refrigerant leaks at the coil (often invisible — only the slow loss of cooling capacity tips you off), frozen coil (caused by low refrigerant or low airflow), and corrosion of the copper tubing where it joins the aluminum fins.
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