What is a Generic Handler in asp.net and its use?

Generic handlers are the .NET components that implement the System.Web.IHttpHandler interface. Any class that implements the IHttpHandler interface can act as a target for the incoming HTTP requests. Page is also generic handler. In general generic handlers have an extension of ASHX.

You can find example here

Handlers are used when you want to avoid the overhead of a regular asp.net page. Practical examples include image processing or handling AJAX requests.

See Using HTTP Modules and Handlers to Create Pluggable ASP.NET Components.