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In this tutorial, MDTE demonstrates how to overlay one image on another using Microsoft Paint. He starts by having two images ready on his desktop: one of clouds and another of the Sun. He begins by opening Microsoft Paint twice to create two separate windows. After positioning them on either side of the screen, he accesses the first image in one window by clicking the drop-down arrow under the notebook icon and selecting "open." He then repeats the same process in the second window to open the second image. This sets the foundation for combining the two images effectively.