The document discusses state machines and finite state machines. It describes two models for representing sequential circuits: Moore circuits where the output depends only on the present state, and Mealy circuits where the output depends on both the present state and inputs. The state diagram and state table are introduced as ways to represent a state machine pictorially and tabularly. Methods like state reduction, state assignment, and implementation using flip-flops are also covered. Examples of state machines like adders, detectors, generators and counters are provided.