Memory vs Context vs Skills in AI Agents

Question

One common mistake I see is people using these terms interchangeably. 

Memory is information retained from past interactions. 

Context is information inside the model's current context window. 

Let's simplify it with an example.

Suppose you have a file called: company_policy.md

Scenario 1:

The AI agent hasn't read it.

Is it memory?

No.

Is it context?

No.

It's simply knowledge (or a knowledge source). 

Scenario 2:

The agent searches company_policy.md and injects the relevant sections into the prompt.

Now it becomes context.

The model can now use that information to answer your question.

Scenario 3:

Now imagine the agent maintains information about the user: user_profile.md

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After every conversation with the user, it updates this file.

This file is memory.

Because it stores information the agent has learned and will reuse in future interactions.

Now, if relevant information from this file is included with the prompt, that memory information becomes the context.

Ok, then what is Skill?

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