UDP (User Datagram Protocol) is a so-called "send and pray" protocol. You throw data onto the network and have no guarantee of when (if ever) it reaches its destination. Nonetheless, it is used because it is extremely fast and efficient.
Raw UDP cannot normally be used for streaming. RTP is used on top of UDP to provide proper data timestamps and ordering. RTP/UDP is extensively used for streaming live audio/video. In this case it is not important that you receive all data, as long as you receive some data continuously and fast.
Although VLC supports this protocol for streaming, not all audio and video codecs can be used.
See the Streaming features list for further details.