Tokenization
Splitting text into the subword units a model actually processes, using a fixed vocabulary learned from training data rather than whitespace or dictionary words. A word outside that vocabulary gets split into smaller known pieces instead of failing outright. Every piece counts against the context window, which is why token count and word count are never the same number.
Why exams ask this
Exams test the gap between token count and word count, not the mechanism. The distractor usually assumes one token equals one word, which undercounts both cost and how much of the context window a prompt actually consumes.
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