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Nick introduces the concept of encoding and decoding data in base64 in C#. Base64 is a binary to text encoding that translates binary data into text, primarily used for moving binary data in systems that support text, such as email protocols like SMTP. In the tutorial, Nick demonstrates a simple example of converting text into bytes and then encoding those bytes into base64. By encoding data in base64, it can be easily decoded back into binary data on the receiving end.