Our dialog agents are powered by our own proprietary technology based on large language models, built and trained from the ground up with conversation in mind.
Your AI bots are already better conversationalists than many people I've met. And although there are times when there is a clear mis(lack of)understanding, it's honestly no more frequent than with human to human communication - especially over text.
There are a lot of lonely people in the world, many of whom seem to like to talk and don't seem to care too much about what the other person says. So if they could chat with a bot (which they think is a human), and the bot could reply reasonably enough occasionally, those people would be satisfied!
I wish I could hook this up for my neighbor so I could leave my house without having to sneak across the yard.
I guess it's probably something along the lines of "LaMDA: Language Models for Dialog Applications" (see https://arxiv.org/abs/2201.08239 ). Given that the three first authors are part of the team at Character.ai (see https://beta.character.ai/help)
Maybe GPT was already better than I realized. Or it's something different that I haven't heard about.