A Ruby on Rails project is created with the graphql-ruby gem, allowing for a GraphQL API to be integrated into the application. The project includes models for Artist and Item, which are used to create data that can be queried using GraphQL. A query is written in GraphiQL to fetch data from the database, including artists and items. The GraphQL schema is defined using the graphql-ruby gem, with fields and types specified for the queries and mutations. The project uses React and Apollo Studio Explorer as part of its development process. The code is generated using Rails generators, which automate the creation of files with boilerplate code. The GraphQL API is then executed using the GraphiQL interface in the browser, allowing developers to test and interact with the data.