Claude Code is different from typical chat applications. Understanding how it works under the hood will help you use it more effectively.
Claude Code is best explained through the agentic loop:
Throughout this loop, you can add context, interrupt, or steer the model to help guide it toward your goal.
Claude has a context window that determines how much of your conversation, file contents, command outputs, and more it can store and reference. Once you reach that limit, Claude Code compacts your conversation — automatically determining what it can remove or summarize to bring the context window back down to a usable size.
Tools are the backbone of how agents work. Most AI assistants simply take text in and return text out. Tools let Claude Code determine when to execute code to get closer to completing a task. This could be a file-reading tool, a web search tool, or any number of other capabilities. Claude Code uses semantic understanding to determine when to call a tool and how to use the output.
Claude Code has several permission modes:
Which mode a new session starts in depends on your plan and settings.
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All of this can be configured in your settings file. Be cautious when skipping permissions — giving Claude Code free rein to run commands means a mistake could be harder to catch before it happens.
Claude Code combines several agentic concepts: an agentic loop, a managed context window, tools, and configurable permissions — all inside your terminal. It can read your codebase, take action, and verify its own work. That's what makes it fundamentally different from a chat window.