When you create a new object in Ruby using ClassName.new, Ruby automatically calls the initialize method inside that class. This method is like a setup step where you can assign starting values to the object's instance variables, which are variables that belong to the object itself. For example, if you have a Person class with an initialize method that takes a name, when you do Person.new("Alice"), Ruby calls initialize with "Alice" and sets @name to "Alice". The initialize method does not return anything explicitly, but Ruby returns the new object with the instance variables set. Later, you can access these variables inside the object. This process helps you create objects that start with the data you want.