AI Chatbots 101

How AI Chatbots Work: RAG, Embeddings, and Precision Search

May 08, 2026
2 min read
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The Core Technology: Retrieval-Augmented Generation (RAG)

Many business owners worry that AI assistants will make up fake information, also known as 'hallucinating.' This is where Retrieval-Augmented Generation (RAG) comes in. RAG is a method that restricts the AI to search only through your approved business documentation.

Instead of generating answers from general internet training, the chatbot behaves like an open-book researcher. When a customer asks a question, the RAG system performs a real-time search within your uploaded PDF files or crawled web pages to find the most relevant paragraphs first, and then uses that verified information to construct a response.

What are Vector Embeddings?

Vector embeddings are the magic behind modern semantic search. Computers do not understand words the way humans do; instead, they understand numbers.

  1. Text Chunking: Your documents are divided into small, manageable paragraphs (chunks).
  1. Vector Translation: Each chunk is passed through an embedding model, which translates the semantic meaning of the text into a mathematical vector (a long list of numbers representing coordinate points in high-dimensional space).
  1. Semantic Alignment: Chunks with similar meanings are stored close together in a vector database. For example, 'shipping rates' and 'delivery charges' will align close to each other.

How the Answer is Constructed

When a user asks: 'What is the refund policy for damaged shipments?', the platform converts their query into a temporary vector, performs a mathematical calculation (cosine similarity) to retrieve the closest matching text chunks from your documents, and feeds those verified chunks directly to the LLM to draft a precise response that cites specific source pages.

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Ankur Shahi

Platform Contributor

Founder of Ewbly. Experienced product developer focusing on optimizing customer experience through no-code AI automation and local Indian UPI billing systems.

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