Anypoint Studio has a built-in feature to automatically generate documentation for Mule projects. The documentation plugin allows users to generate an HTML-based documentation with a single click that describes each flow, element, and attribute in the project. Developers can add descriptive text to components using the "doc:name" attribute, which will then appear in the generated documentation. The documentation is saved as an index.html file in a selected folder, displaying both graphical and XML representations of the project's configuration.