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This video introduces the concept of file extensions, which are three or four letter suffixes at the end of file names that indicate the type of file. For a long time, Microsoft Word saved documents with a .docx extension, but now the extension has changed to .docX. This change is to make Word documents more exciting and signifies that the program can produce visually appealing documents. The old .doc standard was proprietary, while the new .docX format is more versatile and visually appealing.