AI glossary for business owners
Luxxstack wrote this glossary to explain the AI terms you'll hear when you look into AI for your business. Every entry opens with a short definition you can quote, then an example from a real kind of business. There are 20 terms, from AI agent to UK GDPR.
Updated October 2026
- agentic AI
Agentic AI describes AI systems that act toward a goal over several steps, deciding what to do next and using tools along the way, rather than answering a single prompt and stopping.
- AI agent
An AI agent is software that can take a goal, work out the steps and carry them out using the tools it has been given, such as email, a CRM or a spreadsheet.
- AI automation
AI automation uses AI to handle a repeated task from start to finish, including the parts that need reading and understanding, like sorting a message or pulling figures from a document.
- AI employee
An AI employee is an AI set up to do a defined job inside a business, such as handling the inbox or chasing paperwork, working alongside the people who are already there.
- AI governance
AI governance is the set of rules, roles and checks a business uses to keep its AI use safe and accountable: which tools are approved, what data they may see, who signs off, and how it is reviewed.
- AI integration
AI integration means building AI into the systems and routines a business already uses, so it does real work inside them instead of sitting in a separate tab.
- AI readiness
AI readiness is how prepared a business is to get real value from AI: whether its work follows repeatable steps, its information is in usable shape, it knows what rules apply and its people are willing to try.
- AI workflow
An AI workflow is a repeatable sequence of steps in which AI does some of the work, such as reading an incoming document, checking it, filing it and flagging problems.
- API integration
An API integration is a connection that lets two pieces of software exchange information automatically, such as your CRM sending a new contact to your email tool.
- audit trail
An audit trail is a time-stamped record of what happened: what the AI did, what it was based on, and who approved or changed it.
- chatbot
A chatbot is a program you talk to in a chat window, usually to get answers or complete a simple request.
- data processing agreement
A data processing agreement, or DPA, is a contract between a business and a supplier that handles personal data on its behalf.
- guardrails
Guardrails are the limits built around an AI system that stop it doing things it should not, such as sending messages without approval, touching certain files or going beyond the task it was given.
- hallucination
A hallucination is when an AI states something that sounds confident but is wrong or invented, such as a made-up figure or a source that does not exist.
- human in the loop
Human in the loop means a person reviews and approves what an AI prepares before it takes effect.
- LLM (large language model)
A large language model, or LLM, is the kind of AI behind tools like ChatGPT.
- prompt
A prompt is the instruction or question you give an AI.
- proof of concept
A proof of concept is a small, quick trial that shows whether an idea works on a real task before you commit to a bigger build.
- RAG (retrieval-augmented generation)
Retrieval-augmented generation, or RAG, is a way of letting an AI look things up in your own documents before it answers, so its reply is based on your information rather than only on what it learned in training.
- UK GDPR (AI context)
UK GDPR is the UK's data protection law.
Questions people ask
What is the AI glossary for?
It gives short, plain-English definitions of the AI terms business owners come across, each with an example from a real kind of business.
Who writes the definitions?
Luxxstack. They are general explanations, not legal or technical advice.
Is an AI employee a real employee?
No. It is an AI that does a defined job alongside your people. The business stays responsible for what it does.