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In this video tutorial, the presenter demonstrates how to create a modified block business letter using open punctuation. Open punctuation omits the colon after the salutation and the comma after the complimentary close. This differs from mixed punctuation, which includes these punctuation marks. To set up the letter in modified block format, a tab should be set at 3.25 inches on the ruler, which is the midpoint of a 6.5-inch typing line. Both the date and closing lines are positioned at this midpoint. The presenter suggests formatting can be done either before starting the letter with a blank document or after completing it. The letter shown is already correctly formatted with proper spacing.