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In this video tutorial, the creator demonstrates how to reduce the file size for photos on an iPhone. They recommend changing the camera settings to capture photos and videos in the high efficiency format instead of the most compatible format, which uses jpeg.h264 and creates larger file sizes. By selecting high efficiency, the file sizes will be smaller, although the quality may not be as high. Accessing these settings through the camera application in the iPhone's settings is crucial for managing file sizes effectively.