What Is MCP? How It Works (vs RAG) in AI Assistants

MCP (Model Context Protocol) is a new standard introduced by Anthropic that allows AI models to call tools, access APIs, and fetch real-time data during conversations. Unlike RAG which retrieves information upfront using vector similarity search, MCP enables dynamic, real-time interactions with external systems. The protocol acts as a standardized interface between AI models and external tools, with MCP servers providing structured information about available functions. While RAG excels at knowledge retrieval tasks, MCP shines in interactive scenarios requiring live data access and tool execution. Both approaches can work together effectively, with major tech companies like Microsoft and Google adopting MCP as the standard for AI agent deployments.