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The tutorial explains how to automate email categorization by creating rules in the settings. By accessing the rules drop-down menu, users can set up criteria for emails to be automatically categorized. In this example, all emails from Jasmine Kovac at Waimea.com are categorized as client X emails. The process involves selecting the specific criteria, such as identifying the sender, and choosing the action to take when the criteria are met. This automated process streamlines email organization and saves time.