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In this tutorial by Mr. Chips, viewers learn how to insert images from an Excel sheet into a Microsoft Word document using mail merge. The tutorial begins with the presenter showing the Word document alongside the Excel file. To insert images, the first step is to create a list of pictures in the Excel sheet, corresponding to a specific field for each entry, such as student profiles. The presenter emphasizes that while the images can be placed anywhere in the Word document, he chooses to position them on the right side. A table is created to accommodate the images at the desired location. This method allows for seamless integration of images into the Word document.