The Azure AD provider for Terraform is used to manage Azure Active Directory resources declaratively. It allows users to automate tasks such as provisioning users, managing compute permissions via Azure AD groups, and creating groups in Azure AD. To use the Azure AD provider, one must authenticate using various methods like Azure CLI, Service Principals, or Managed Service Identities. The account used by Terraform needs to have appropriate permissions for managing Azure AD objects, which can be granted via Roles and administrators section of Azure AD. Additionally, the Azure AD provider supports assigning specific API permissions to Service Principals. Examples provided include managing users and groups, as well as creating a Service Principal and granting RBAC permissions.