Ollama facilitates the creation of retrieval augmented generation (RAG) applications by supporting embedding models that convert text into vector embeddings, which are numerical representations of semantic meanings. These embeddings are used to search for semantically similar data by storing them in a database. Ollama provides several example embedding models, such as mxbai-embed-large, and allows users to generate these embeddings through REST API, Python, or JavaScript. By integrating with tools like LangChain and LlamaIndex, Ollama supports workflows that involve embedding generation, storage, and retrieval, demonstrated through a step-by-step example of building a RAG application. This process includes generating embeddings for documents, storing them in a database, querying the most relevant document based on a prompt, and generating a response using the retrieved data. Future enhancements are anticipated, including batch embeddings, OpenAI API compatibility, and support for additional embedding model architectures.