An inventory file is the source of truth for Ansible (there is also an advanced concept called dynamic inventory, which we will cover later). It follows the Initialization (INI) format and tells Ansible whether the remote host or hosts provided by the user are genuine.
Ansible can run its tasks against multiple hosts in parallel. To do this, you can directly pass the list of hosts to Ansible using an inventory file. For such parallel execution, Ansible allows you to group your hosts in the inventory file; the file passes the group name to Ansible. Ansible will search for that group in the inventory file and run its tasks against all the hosts listed in that group.
You can pass the inventory file to Ansible using the -i or --inventory-file option followed by the path to the file. If you do not explicitly specify any inventory file to Ansible, it will take the default path from the host_file parameter of ansible.cfg, which defaults to /etc/ansible/hosts.