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In this tutorial, Mr. Chips explains how to insert images from an Excel sheet into a Microsoft Word document using mail merge. The process involves creating a table in the Word document to position the images correctly, specifically at the right side. First, users need to prepare a list of images (e.g., student profile pictures) in the Excel sheet. Each image should be associated with corresponding data in the Excel file. By doing this, one can easily merge and insert the images into the Word document at designated locations, allowing for a customized layout. The tutorial emphasizes the flexibility of placing images anywhere within the document.