6 Feb

Generative AI: What is it and how does it work?

Generative AI has emerged as a prominent subject in the tech world, sparking discussions globally. However, the question remains: What exactly is Generative AI?
Bernardo Borges
min read

Generative artificial intelligence, or generative AI, refers to the use of AI technology to create new content such as images, videos, text, music, and audio.

Generative AI is powered by large AI models that can conduct multiple tasks with  exceptional speed and accuracy, including classification, image recognition, question-and-answer, summarisation, and more.  

These models can also be trained and adapted for specific use cases across several industries. 

Generative AI

The Rapid Evolution of Artificial Intelligence

Alan Turing’s work in the 1950s paved the way for artificial intelligence research. The Turing Test was designed to determine whether a machine could mimic human intelligence. In the 1960s, this paved the way for the development of LISP, the first AI programming language by John McCarthy. 

It was in the 1990s that the focus of AI shifted from expert systems to data and machine learning alongside the increasing number of innovations in computing power and data research.

Neural networks and support vector machines were invented, allowing AI systems to “learn” much more efficiently. In the 2000s, AI forayed into robotics, computer vision, and natural language processing—laying the groundwork for the AI boom we’re seeing presently. 

The Intriguing World of Generative AI

The Generative Pre-trained Transformer (GPT) AI model by OpenAI and other large-scale neural networks contributed to the explosive adoption of AI across industries. GPT-3, released in 2020, has been the benchmark of natural language understanding as well as AI generation capabilities.

Its success has inspired further research, with GPT-4 being the latest and more advanced version. It builds upon its predecessors and has even more advanced capabilities, pushing the envelope in generative AI even further.

What is Generative AI?

Let’s take a look at the different components of generative AI and how it compares to other types of AI:

Generative AI vs. Predictive AI vs. Conversational AI

Generative AI is concerned with creating new content. Because of its applications, it has become beneficial for marketing, creatives, and even entertainment. Generative AI uses machine learning technology to build new data from existing data. This includes generating text, images, videos, music, and more.

Conversational AI is more popularly known for its application in chatbots and virtual assistants. It works through machine learning, Natural Language Processing (NLP), and semantic understanding. NLP mainly allows the machine to understand and respond to human language, while machine learning enables it to learn from previous interactions and improve accuracy over time. Semantic understanding is concerned with understanding what the user needs, increasing the relevance of every response. 

Predictive AI uses algorithms based on statistics as well as machine learning techniques to identify patterns in historical data. As such, the AI can understand complex data sets to make predictions about future events. This is usually used to help businesses and traders make data-informed decisions. 

Generative AI Brain

The History

The first iterations of generative models were Gaussian Mixture Models (GMMs) and Hidden Markov Models (HMMs), both invented in the 1950s. These models produced successive pieces of data, like speech. As such, one of the earliest applications of generative AI was speech recognition. However, it was only after the rise of deep learning, that the productivity of generative AI significantly rose.

As for NLPs, Recurrent Neural Networks (RNNs) introduced in the late 1980s were forerunners used for language modelling tasks. They could model long dependencies and generate longer sentences. Long Short-Term Memory (LSTM), a type of RNN, was developed later.

The advent of Generative Adversarial Networks (GANs) in 2014, developed by computer scientist Ian Goodfellow, however, marked a significant milestone in generative AI technology. GANs are unsupervised machine learning algorithms engaging competing neural networks.

The transformer architecture model, introduced in 2017,  is another type of AI model that played a significant role in the development of generative AI. Just like RNNs, transformers also process sequences of data like natural language text. Its architecture is applied to NLPs, leading to the creation of large language models like BERT and GPT.

Types of Generative AI

There are several types and applications of generative AI:

Autoregressive Models

Autoregressive models generate data per element and predict the probability distribution of each succeeding element based on the context of the previously generated elements.

Generative Adversarial Networks (GANs)

As mentioned earlier, GANs consist of two competing neural networks: the generator and the discriminator. They compete in a game-like setup, where the generator creates synthetic data. Meanwhile, the discriminator is tasked with distinguishing whether the data is authentic. The goal is to create increasingly realistic data, so it passes off as real and “fools” the discriminator.

Variational Autoencoders (VAEs)

VAEs learn to encode data and then decode it back in order to reconstruct the original data. VAEs learn representations of the original data based on probability, allowing them to create new samples from the learned data set. They are commonly used in image and audio generation. 

Recurrent Neural Networks (RNNs)

RNNs process sequential data like natural language and time-series data. They are typically used for generative tasks and can accurately predict the next element in the sequence given the previous elements. RNNs cannot generate long sequences of text, though, so advanced models like Gated Recurrent Unit (GRU) and  Long Short-Term Memory (LSTM) were developed.

Transformer-based Models

GPTs are transformer-based and perhaps most popular among the generative AI family for their generative and language processing capabilities. They use attention mechanisms to effectively sequence data and handle long sequences. This makes them aptly suited for generating contextually relevant, coherent text.

What Are Its Applications?

Generative AI has permeated various industries, freeing valuable time across multiple teams. It can be used to generate images for marketing and sales purposes, as well as for creating text (articles, blogs, copy). 

AI can also be used in software and coding, significantly speeding up time-to-market.  Additionally, video and audio generation are also becoming increasingly popular for entertainment purposes. 

What Are Its Challenges?

Among the top challenges of generative AI is handling technical complexity, meaning that subject matter expertise remains a mammoth task for AIs to achieve. 

Adoption is another challenge, as it can be expensive for smaller organisations looking to create customised AI solutions for their business. Additionally, integrating AI and legacy models continues to be challenging, requiring either migration or complete replacement — both complex and time and effort-intensive.

There’s also the issue of hallucinations, where AIs generate gibberish or output that does not make much sense. Such cases would necessitate manual or human checks to ensure AIs generate relevant, quality, and accurate content. 

Further, establishing and implementing AI governance at an organisational level will require clearly defined and robust ethical foundations. This will ensure that the use of generative AI within the workplace remains risk-focused and adaptable. 

When dealing with generative AI, copyright infringement and plagiarism pose challenges, in addition to the permissibility issues of using it to create text, audio, image, and video outputs. 

What Are its Benefits?

AI can be very helpful for those looking to streamline business processes. By identifying opportunities to automate tasks and generate data, organisations big and small can significantly reduce employee workload while enhancing efficiency and optimising workflow. 

Generative AI in the form of chatbots and virtual assistants has also proven very helpful in improving customer service and maintaining fast response times contributing to increased customer satisfaction. 

The technology also helps foster market innovation, especially for companies looking to find a foothold and grow in new and untapped markets. AI can assist with new product development, additional valuable insights, service opportunities, and potential market changes.

​​Additionally, Generative AI also helps drive digital transformation by providing businesses with data-rich insights that aid in better decision-making. Additionally, AI can inspire creativity by providing prompts and fresh ideas, especially in written and image content.

Generative AI Best Use Cases Across Industries


AI has been seamlessly integrated into the financial sector, in a spectrum of applications, from fraud detection to portfolio management. The accessibility and efficiency of investing have been significantly enhanced by the presence of robo-advisors and algorithmic trading systems. 

Also, AI-driven risk assessment models have elevated the accuracy of credit and loan evaluations.


Healthcare is another sector that has benefited significantly from AI-powered diagnostic tools. These tools have contributed to improved disease detection,  facilitating more accurate and timely diagnosis. 

Additionally, the acceleration of drug discovery through AI-driven processes is paving the way for the swift development of new treatments. 


Manufacturing is also witnessing an increasing AI adaptation, particularly in smart factories. Robotics and advanced automation systems are optimising production processes, resulting in reduced waste and increased overall efficiency. 

Predictive maintenance (PdM) is the ability of AI to anticipate issues by processing large volumes of data. Manufacturing facilities that implement Predictive Maintenance can anticipate when their assets need attention and address this in time. This helps avert equipment breakdown, which can lead to repairs, delays, and angry or unhappy customers.


In retail, AI is revolutionising customer experience by facilitating personalised recommendations, intelligent chatbots, and advanced inventory management. 

Retailers are leveraging AI-driven analytics to gain deeper insights into customer behaviour and preferences, enabling them to tailor their offerings accordingly.

Our own use of Generative AI - My Content Scout

MyContent Scout is an AI content analysis and search tool, developed by The Virtual Forge,  designed to elevate user experience by helping them discover valuable insights from multiple data sources simultaneously. 

This cutting-edge solution empowers users to pose questions and effortlessly retrieve pertinent information from a range of customer-provided content types, including documents, videos, audio files, images, e-learning packages, and Power BI dashboards.

Leveraging MyContent Scout's robust AI technology, users can delve into and analyse diverse data sources, reaping the rewards of categorised results, as well as AI-generated summaries and quizzes.

If you want to learn more about My Content Scout, you can find more information on its website.


Generative AI applications span industries, from marketing and sales to software development and entertainment, offering unprecedented efficiencies and capabilities. However, challenges such as technical complexity, adoption barriers, and the risk of hallucinations underscore the need for ongoing upgradation.

The benefits of generative AI are evident in streamlined business processes, enhanced customer service via chatbots and virtual assistants, and its pivotal role in fostering market innovation and digital transformation. 

Beyond data-rich decision-making, AI sparks creativity through prompts and fresh ideas that inspire inventive solutions.

How can The Virtual Forge help?

At The Virtual Forge, we aim to build data-rich, intelligent platforms that solve real-world problems. We use a collaborative approach that lets us know what our clients need so that we can provide efficient and unique solutions for their business problems.

If you are looking to understand the intricacies of when and how to effectively apply these AI & ML technologies in your business, learn more about our Artificial Intelligence Services here.

If you want to learn more about My Content Scout, our brand-new AI application, you can find more information here.


Can generative AI create anything other than text?

Generative AI is not limited to generating text; it has the capability to create various forms of content, including images, sound, and data manipulation.

Is text produced by generative AI accurate?

The accuracy of text generated by Generative AI is variable and depends on factors such as the model's training data and the context of the input.

What are hallucinations?

A "hallucination" in the context of AI refers to a response that appears coherent and confidently presented but lacks a factual basis. Hallucinations may occur when the model's response is not grounded in its training data or real-world information, among other reasons.

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