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In this video tutorial, the presenter demonstrates how to reduce the file size of a Microsoft Word document containing large images. By adjusting the image size and quality settings in the advanced options menu, users can lower the resolution to decrease the file size for easier sharing or use. The default setting is 220 ppi, but this can be altered based on the user's needs, such as higher resolution for printing purposes. This process is helpful for situations where high image quality is not essential, such as emailing or sharing documents online.