The document discusses knowledge-based agents and how they use inference to derive new representations of the world from their knowledge base in order to determine what actions to take. It provides the example of an agent exploring a cave, or "Wumpus world", where the goal is to locate gold and exit without being killed by the Wumpus monster or falling into pits. The agent uses its percepts and knowledge base along with inference rules to deduce its next action at each step.