React Hooks serve as stateful functions that simplify complex React components by breaking them into smaller, functional blocks, eliminating the need for abstractions like higher-order components and render props. The text discusses using React Hooks with GraphQL in a chat application, comparing two major libraries: `graphql-hooks` and `@apollo/react-hooks`. Both libraries support GraphQL operations, caching, and server-side rendering, but differ in complexity and additional features like middleware and caching configuration. The application setup involves using Hasura for backend GraphQL integration with a Postgres database, and the chat application utilizes GraphQL operations such as mutations and subscriptions for real-time data updates. The implementation details include importing necessary packages, setting up HTTP and WebSocket links, and configuring the Apollo or GraphQL client, with code examples provided for component setup. The discussion concludes by suggesting that the choice between the two libraries depends on project needs and personal preference, highlighting LogRocket as a tool for monitoring and debugging GraphQL requests in production.