Retrieval-augmented generation (RAG) is an AI approach that enhances response accuracy by combining data retrieval with language generation, allowing businesses to utilize real-time data for more relevant interactions. RAG applications are versatile, applicable in various sectors including healthcare, customer service, and finance, and improve user experience through personalized, context-aware assistance. The document outlines the fundamentals of RAG app development, its benefits, and provides a step-by-step guide for creating effective RAG applications.