What is AI?

Learn what Artificial Intelligence (AI) is and how it works.

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Introduction 1. What AI is and how it works 2. The different types of AI 3. Learn more about AI

Introduction to 'What is AI?'

We hear about Artificial Intelligence (AI) in news headlines and social media posts. These stories show how AI technology is changing the world around us. At the same time, we’re already using AI tools and features in our daily lives, sometimes without realising it.

This lesson will help build your confidence in understanding what AI is, how it works and what it can do. 

Before you start to use AI

It’s important you understand the risks and the steps you can take to keep safe.

Our lessons 'Checking AI' and 'Using AI responsibly' take you through these. We recommend you take these lessons before you use AI.

What you'll learn

  • What AI is and how it’s different to other software.
  • Common terms when using AI.
  • The different types of AI and what you can do with them.

How long it takes

6 minutes

Chapter 1 - What AI is and how it works

What AI is and how it works

Chapter 1

How long it takes

3 minutes

Defining AI

AI is technology that enables computers to learn, reason and  perform tasks that would normally require human intelligence.

 

These include:

Understanding language

Recognising images, speech and patterns

Solving problems

Learning from data

Making recommendations

Supporting decision-making

How is it different from other software?

Traditional software follows rules created by humans, along the lines of ‘If this happens, do that’. For example, a calculator follows a fixed set of instructions to work out ‘2 + 2’.

AI learns from data. Rather than following a fixed set of instructions for every situation, AI can adapt its behaviour, based on what it learns.

For example, a music app remembers the songs and artists you listen to most often. It then looks for patterns in your listening habits to suggest music you might enjoy.

To do this, AI uses data, maths and probability. Imagine that 70% of the music you play is pop, 20% is rock and 10% is hip-hop. Based on those patterns, AI is most likely to recommend more pop songs because the data suggests that's what you prefer.

The ability to learn, recognise patterns and improve over time is what makes AI different from conventional software.

What does AI look like?

You’ll find AI in many different digital tools, apps and websites. Some people start exploring AI through chatbots and AI assistants.

 

What are chatbots and AI assistants?

These are AI tools that you can talk to. Examples include ChatGPT, Google Gemini, Microsoft Copilot, Alexa and Siri.

How do I ask AI a question or to do something?

Whether you’re talking to Siri or typing a question into ChatGPT, you’re using something  called a ‘prompt’. 

 

What is a prompt?

Prompts can be short commands  like ‘play some relaxing music’ or questions like ‘What’s the weather today?’. Or they can be more detailed. For example, ‘We’re a family of four with school-age children. Give me some low-cost summer holiday ideas that will keep everyone entertained but not exhausted'.

More on this topic

Interested in how to write prompts to get better results from AI? Check out our 'Using AI prompts' lesson.

How Does AI Work?

Just as humans learn from experience, AI learns by analysing large amounts of information and identifying patterns within it. It doesn’t ‘think’ in the same way as us. Instead, it uses mathematical models and algorithms to process information, produce results and reply to our requests in human-like language.

Common questions about AI

  • Not all AI exists in robots, though you may find it in the ones that can mow your lawn or vacuum your home.

    But most AI is software running in apps, websites, and digital services.

     

    For example, you'll see it in:

    • Streaming services, suggesting what movies or music you might enjoy.
    • Email tools that summarise your messages and help you draft a reply.

     

  • Today's AI can perform impressive tasks, but it doesn’t have human emotions, consciousness, or common sense. It simply processes information, recognising patterns based on data, and using probability to make predictions and give answers.

  • While AI can automate certain tasks, it often works best when working alongside people, helping them work more efficiently and make better decisions. And there are times when AI can’t help – when you need a human expert instead.

    Learning when and how to get the most of AI takes time and practice. Think of this lesson as your first step toward this.

More on this topic

Trying to work out whether to ask AI, a human or both?

Our 'Making better AI decisions' can help.

Introduction - What is AI?
Chapter 2 - The different types of AI

The different types of AI

Chapter 2

How long it takes

2 minutes

AI for different uses

Artificial Intelligence isn’t just one type of technology. It covers a range of different tools, each designed to do different things. Understanding the different types of AI can help you choose the right tool for the job and make the most of what AI has to offer. 

For example, you can:

 

  • GenAI creates new content from a prompt. Tools you can use to do this include ChatGPT, Microsoft Copilot, Gemini and Claude.

    Use it to:

    • Create a holiday plan.
    • Use ingredients you have to come up with recipe ideas.
    • Design invitations.
    • Turn an idea into a story, poem or song. 

  • Predictive AI forecasts or estimates what’s likely to happen next. Tools that use this type of AI include navigation apps, streaming services and email tools.

    Use it to:

    • Predict traffic on your journey.
    • Pick films you might enjoy.
    • Suggest email replies and filter spam.

  • Analytical IT looks at information and finds patterns, trends or insights. Tools that use this include banking apps, fitness trackers and photo apps.

    Use it to:

    • Analyse your spending habits.
    • Explain sleep quality.
    • Find people, places and events in your photo library.

  • Conversational AI lets you engage with technology using natural language. Tools you can use to do this include Alexa, Siri and Google assistant.

    Use it to:

    • Ask a question.
    • Practise a foreign language through conversation.
    • Get step-by-step instructions on a task.

  • Agentic AI does more than just analyse or predict. You can use it to carry out actions on your behalf. You might also hear the term ‘AI agent’ which is just another name for this type of AI tool or function.

    Tools you can use to do this include ChatGPT, Microsoft Copilot and Google Gemini.

    Use it to:

    • Plan an entire trip ( including researching options).
    • Compare products and make recommendations.
    • Summarise unread emails and draft replies.

How they can work together

When you use AI tools and apps, you might use more than one of these types.

Here’s an example that uses all of them.

 

Imagine you're planning a family holiday.

Generative AI

Creates a travel itinerary.

Predictive AI

Forecasts weather and travel times.

Analytical AI

Compares costs and highlights the best options.

Conversational AI

Lets you ask questions and refine the plan.

Agentic AI

Books hotels, schedules activities, and manages changes for you.

Chapter 1 - What AI is and how it works
Chapter 3 - Learn more about AI

Learn more about AI

Chapter 3

How long it takes

1 minute

Useful terms you may see or hear

Hallucination

Sometimes, AI confidently gives you information that isn’t correct. This is called hallucination.

For example, if it invents a book, website or fact that doesn’t actually exist. 

Bias

AI learns from human-created data. Because it comes from humans, sometimes this data is biased.

‘AI bias’ describes the unfair or skewed information that AI may give, based on this kind of data.

Deepfake

When an image, audio or video seems real but is actually AI-generated, it’s sometimes known as ‘deepfake’.

For example, fake celebrity videos or AI-generated voice recordings that pretend to be real people speaking. They’re realistic – but not real.

More on this topic

Want to learn how to spot AI hallucinations, bias and deepfakes?

Our 'Checking AI' lesson can help you do this.

Machine learning

This is how AI tools are built differently to other software. They don’t come ready-programmed for every single situation. Instead, they learn from examples and build on this learning.

They use a combination of:

  • Gathering data to gain knowledge.
  • Using maths and probability to spot patterns and predict.

Large Language Model (LLM)

LLM is the technology that powers many AI chatbots and assistants. It’s an AI system that’s specifically trained to understand and generate human-like language. This lets it answer your questions, write content and hold conversations.

Tools like ChatGPT, Copilot, Gemini and Claude all use LLM to help them understand your requests and to reply to them in a way that you can understand, too.

Next steps

In this lesson, we’ve explored what AI is and shared a few ideas on how it can be used in your everyday life. We have a range of lessons that can help you grow your AI skills further.

Chapter 2 - The different types of AI

Want to learn more?

Artificial Intelligence

Go to topic Artificial Intelligence

 

Lloyds Bank Academy is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Lloyds Bank does not endorse the services they provide. The information in this module was last updated on 27th July 2026.

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