Tencel is a brand name for a set of fibers called lyocell and modal (think of it like Band-Aids are to bandages or Kleenex are to tissues). These fibers are known for feeling super soft and are widely used in sustainable fashion.
Tencel is somewhat similar to rayon (i.e. viscose) because they’re what the industry refers to as “regenerated cellulose” fibers. Manufacturers take wood pulp, dissolve it in a chemical solvent, then push it through an extruder to form the fibers.
The big difference is rayon requires more energy and chemicals to produce, which is both wasteful and toxic for the workers who make it. Tencel, on the other hand, uses chemicals that are less-toxic and get recycled in the process so there’s minimal waste.