The document discusses N-tier architecture, which divides applications into multiple tiers or layers. A 1-tier architecture has all components on one machine. A 2-tier architecture separates the user interface from data storage. A 3-tier architecture separates the presentation, application/business logic, and data tiers. N-tier architecture provides finer granularity by separating an application into smaller specialized modules or functions across multiple tiers. This improves flexibility, scalability, and the ability to update or replace components independently. A common example is a shopping cart application, which separates components like the user interface, business logic for processing orders, and data access across different tiers or servers.