The vocabulary of modern model systems, defined precisely enough to be useful.
A large language model is a neural network trained to predict the next token in a sequence of text, using the transformer architecture. Trained on very large text corpora, it learns statistical structure that generalises well enough to answer questions, write code and follow instructions. It has no database of facts and no lookup step: everything it produces is generated token by token from learned parameters, which is why it can be fluent and wrong at the same time.
Last reviewed 18 September 2026
Inference is running a trained model to produce output. Its cost is driven by tokens and by two structurally different phases: prefill, where the whole prompt is processed in parallel and the work is compute-bound, and decode, where output tokens are generated one at a time and the work is bound by memory bandwidth. That asymmetry is why providers price input and output tokens differently, why output is usually several times dearer, and why long prompts are cheaper than long answers.
Last reviewed 18 September 2026
Retrieval-augmented generation puts a search step in front of the model: the system retrieves passages relevant to the user's question from a corpus it controls, places them in the prompt, and asks the model to answer from that material. It was introduced in 2020 as a way to combine parametric knowledge with an external, updatable store. In practice most RAG failures are retrieval failures — the model answers faithfully from passages that were the wrong passages.
Last reviewed 18 September 2026
An AI agent is a system in which a model decides which actions to take, executes them through tools, observes the results and repeats until a goal is met or a stopping condition fires. The defining property is delegated control flow: the sequence of steps is chosen at runtime by the model rather than fixed by a developer. That is also the source of its difficulty — errors compound across steps, so reliability falls as task length grows.
Last reviewed 18 September 2026
Because a language model is trained to produce likely text, not verified text, and nothing in that objective distinguishes a supported claim from an unsupported one. When the training data is thin, contradictory or absent for a question, the most likely continuation is still a fluent, specific-sounding answer. Training procedures that reward confident, helpful responses can make this worse. Grounding, abstention and verification reduce hallucination; they do not remove the underlying incentive.
Last reviewed 18 September 2026