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In this video tutorial, the narrator explains how to use custom number formatting to properly format telephone numbers in a spreadsheet. This is beneficial for organizing information such as emails, phone numbers, and addresses. They demonstrate how to create a specific format so that when a number is entered, it appears consistent and visually pleasing. The process involves selecting the cell, formatting the number, and creating a custom number format to display the desired format (such as adding parentheses around the area code).