Terraform configurations define resources and outputs. When you run 'terraform apply', Terraform creates the resources like an AWS instance. After creation, Terraform fetches resource attributes such as the instance's public IP. Outputs are then evaluated and displayed to the user. These outputs provide useful information like IP addresses that can be used to connect to the resource or passed to other configurations. Outputs only have values after resources exist, so they show nothing before apply. This process helps users and other Terraform configs get important info about created infrastructure.