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The video tutorial explains word and sentence embeddings, which are essential for large language models. These embeddings help computers understand and process language by converting words and sentences into numerical representations. Rather than humans manually associating words with numbers, a computer, typically using a complex neural network, analyzes the context in which words and sentences appear. Words that are used in similar contexts are grouped closer together in the numerical space, resulting in effective numerical representations. This process leads to significant advancements in how computers understand language.