How is address validation handled in Commerce?

There is a basic address validation module available in Commerce which will make sure the required fields are filled in, and that the email is syntactically valid. It also checks if a valid country was selected. See the documentation here. That does not verify an address is real, only that information was provided.

More checks and validation can be added by extensions, for example through the Avalara integration or the third-party Lob Address Verification extension.