In Rails, associations connect models by defining relationships between them. For example, an Author model can have many Book models, and each Book belongs to one Author. We add has_many :books in the Author model and belongs_to :author in the Book model. This setup creates methods like author.books to get all books for an author, and book.author to get the author of a book. Behind the scenes, Rails uses foreign keys like author_id in the Book model to link records. When we create an author and then a book linked to that author, calling author.books returns the collection including that book, and book.author returns the author instance. This connection makes it easy to navigate related data in Rails applications.