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Kevin demonstrates how to make video files smaller using a compression algorithm to save space. He recommends using Handbrake, a free video transcoder, to not only reduce file size but also crop, resize, and rotate videos. By compressing videos, you can easily incorporate them into PowerPoint presentations or upload them to platforms like Discord, but avoid attaching them to emails to prevent large file sizes. Using efficient compression techniques can significantly decrease file sizes, as shown by two videos with one being 167MB and the other only 63MB.