What role does AWS Identity and Access Management (IAM) play in AWS Lambda?

AWS Identity and Access Management (IAM) plays a crucial role in managing permissions for AWS Lambda functions to access other AWS resources. This capability allows you to define what actions a Lambda function can perform and which resources it can interact with. For example, when a Lambda function needs to read from an S3 bucket, IAM policies can be set to grant that specific permission. By using IAM roles, you can securely control access and maintain the principle of least privilege, ensuring that functions have only the permissions necessary to perform their tasks.

The other options are relevant aspects of AWS but do not accurately describe the function of IAM in relation to Lambda. Billing options pertain to cost management rather than access control, geographical locations are managed through the deployment settings of Lambda and the use of AWS Regions, and versions of the Lambda runtime are determined by the AWS environment setup rather than IAM.