How RTF Works
RTF (Rich Text Format) sits in the middle ground between plain text and a full word-processor document: it stores formatted text, bold, italics, fonts, colors, paragraphs, in a way that almost any program can read. Its clever trick is that the entire file is plain ASCII text. RTF encodes formatting as backslash-prefixed control words mixed into the text; for example, \b turns on bold and \par starts a new paragraph. Because everything is readable text, you can open an RTF in a plain-text editor and actually see how it works.
That human-readable design is the source of RTF's two defining qualities. First, it is extremely compatible: since the format is simple, documented, and text-based, virtually every word processor and text tool on every platform can open and save RTF, which made it the safe lingua franca for exchanging formatted documents between different programs. Second, it is robust and transparent, there is no opaque binary structure to corrupt, and the file is easy for software to parse.
RTF was developed by Microsoft in the 1980s precisely as an interchange format, a neutral way to move formatted text between applications that did not share a native format. For decades it filled that role well: when you needed to send someone a document with basic formatting and were not sure what software they had, RTF was the dependable choice that would open more or less correctly anywhere.
Where RTF Fits Today
RTF still works, but it has been squeezed from both sides. For full-featured documents, DOCX is richer and now widely supported, so the need for a neutral interchange format has shrunk. For finished documents that must look identical everywhere, PDF is the standard. RTF's sweet spot, lightweight formatted text that opens anywhere, is narrower than it once was, but it remains useful when you want basic formatting with maximum compatibility and minimal complexity.
You still encounter RTF as the format of simple editors (like Windows WordPad historically), as an export option for basic formatted text, and in situations where a plain, universally-readable formatted file is preferable to a heavier DOCX. When you need more, you convert RTF to DOCX for editing or PDF for sharing; when you need less, plain TXT.
When to Use RTF
RTF makes sense when you want simple formatting plus broad compatibility without the overhead of a full document format: sharing lightly-formatted text with someone whose software you do not know, exporting basic formatted content from a simple editor, or keeping a document that any program can reliably open. For rich documents you will keep editing, DOCX is better; for fixed, shareable output, PDF; for no formatting at all, TXT. RTF is the lightweight middle option.
Limitations
RTF's limitations follow from its simplicity. It supports only basic formatting, so advanced layout, complex tables, tracked changes, and rich media are limited or unsupported compared with DOCX. Because formatting is spelled out as control words in text, RTF files can be larger than an equivalent compressed DOCX. And it is neither a fixed-layout format like PDF nor a full-featured editor format like DOCX, so it has been displaced for most serious uses. Its enduring value is compatibility, not capability.