Google Ads glossary
An ad group holds the ads and keywords that share one theme inside a Google Ads campaign.
An account contains campaigns, and each campaign contains one or more ad groups. The keywords in a group decide which searches its ads can show on.
Google advises picking a narrow theme for each group, such as one product or service, and keeping keywords that match it.
A focused group lets you write an ad that answers the search exactly. That helps ad relevance, one of the components of Quality Score.
A group that mixes different intents forces one ad to answer everyone. Sorting keywords by intent before you file them also keeps you from paying for clicks that do not belong in the group.
If you connect Google Ads (it is optional), Should I Bid prepares a paused campaign where the keywords to bid on and to test are sorted into closely related ad groups. The ads are still yours to write.
A running shoe store creates a “trail running shoes” group and a “road running shoes” group. Each group has its own keywords, such as “men’s trail running shoes”, and ads that talk about trail or road, never both.
Free tool: Keyword mixer
The keyword mixer combines your word lists (product, city, qualifier) and outputs every combination in the match type you need.
Official source: Google Ads Help: ad group, Google Ads Help: how ad groups work