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A policy can be attached to a user or group. This controls what the users are able to do in AWS.

Policy can be attached to an AWS service? What is the relation between policy and AWS service?

And where does the concept of Role fit in all this?

variable
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Think of role like a container holder for permissions which can be used to delegate access to users, applications, or services that don't normally have access to your AWS resources.

From docs

An IAM role is an IAM identity that you can create in your account that has specific permissions. An IAM role is similar to an IAM user, in that it is an AWS identity with permission policies that determine what the identity can and cannot do in AWS. However, instead of being uniquely associated with one person, a role is intended to be assumable by anyone who needs it.

Jatin Mehrotra
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A policy is an object in AWS that, when associated with an identity or resource, defines their permissions. AWS evaluates these policies when an IAM principal (user or role) makes a request. Permissions in the policies determine whether the request is allowed or denied