> It's attending to the entirety of the context its provided, activating a semantic vector space, and predicting a response based on _that_.

It does so token by token, not by reading all the input and then generating the output. Every output token is also an input token in a tight loop to get the next token with <thinking> as a special section like <tool_call>, trained into the weights via gradient descent.

> I've had AI infer facts about me and attitudes I hold based on related information I provided - I don't see how that isn't theory of mind.

Facebook can predict (know) more about you than any other human from something like a dozen or two likes. There is a surprising amount of information in aggregate data.