Master data is the reference information other transactions depend on: the product codes on an order, the price list it is checked against, the customer it is billed to. When the ERP, the CRM and the ecommerce platform each hold a slightly different version, orders fail validation, invoices go to the wrong address and reports disagree.
MDM sets an owner for each kind of record, a single system of record for it and rules for how changes flow to everything else. It matters for AI because automation that checks orders or documents can only be as accurate as the master data it checks against, so cleaning the product and price master is often the first real task in an automation project.