What Is an AI Token?

An AI token is a small unit of text that a model reads or generates. API pricing is often based on how many input tokens you send and how many output tokens the model returns.

Why tokens matter

• They affect cost
  Long prompts and long outputs usually mean higher usage charges.
• They affect limits
  Models can only handle a certain amount of text per request.
• They affect workflow design
  Verbose prompts and repeated context can make a process much more expensive at scale.

Easy way to think about it

Do not think of a token as a full word. It is closer to a chunk of text. Some short words are a token, some longer words may split into multiple tokens, and punctuation also counts.

When people get confused

Many beginners assume pricing is based on characters or messages. In API billing, the real driver is usually token volume across both the prompt and the response.