An inference engine is a component of artificial intelligence systems that applies logical rules to a knowledge base to deduce new information or make decisions. It processes data and draws conclusions based on predefined rules, allowing the system to solve problems or answer questions. Typically used in expert systems, the inference engine can utilize methods like forward chaining and backward chaining. These methods help in reasoning through the information, enabling applications in various fields such as medical diagnosis, financial forecasting, and natural language processing.