In Rayleigh's differential equation, the parameter mu is a positive real number, similar to parameters in other ordinary differential equations like the Bessel equation. The equation is expressed as y'' - mu y' + (mu (y')^3)/3 + y = 0, which can be rearranged into a system of first-order differential equations. To solve it numerically, one can set mu to a value such as 1 and apply methods like Runge-Kutta. The discussion highlights the need to compute intermediate values for accurate numerical approximation. Properly applying the numerical method is essential for obtaining the solution.