What is a token in AI?

Understanding what tokens in AI are matters more now than it did even a year ago. Tokens have gone from a background technical detail to the primary usage limit and billing unit for top AI models.  If you’ve ever hit your usage limit with Claude Code, you’ve hit a token limit. If you’ve ever wondered why switching to a reasoning model burned through your quota faster, that’s tokens, too. How AI models read your input, generate a response, think through hard problems, and rack up costs—it all com