AI excels at recognizing patterns. With just a few inputs, it can often generate meaningful outputs. It interprets information based on probability, finding structure and relevance in places where humans might only see noise or randomness. When fed large amounts of images or video, it begins to detect patterns which we can't see or make sense of.
Of course, the effectiveness of AI heavily depends on the quality and accuracy of the data it was trained on. When asked to recognize something outside of its original training data, it makes predictions based on what it has learned, guided by probability. Sometimes it’s right, sometimes wrong, and sometimes partially correct. But in any case, it's doing something often better than nothing at all.
We don't understand it completely. What is happening in the deep layers. Top people are working on it. The day we are able to predict a model’s output character by character before giving prompt, that’s the day we will have truly demystified it.