The document discusses N-tier architecture, which divides applications into multiple tiers or layers. A 1-tier architecture has all components on one machine. A 2-tier architecture separates the user interface from data storage. A 3-tier architecture separates the presentation, application/business logic, and data tiers. N-tier architecture provides finer granularity by separating an application into smaller specialized modules or functions across multiple tiers, improving flexibility and scalability. An example is a shopping cart application with tiers for the client/user interface, presentation, business logic/integration, and data.