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The video by Cohere AI discusses word and sentence embeddings, which are essential for large language models. Language models aim to enable computers to understand and process human language. Since language is composed of words and computers only handle numbers, word embeddings convert words into numerical representations. Similarly, sentence embeddings translate sentences into lists of numbers that reflect their meaning. This process is not manually done; instead, a neural network analyzes context, bringing words and sentences closer together based on their usage. Ultimately, this approach leads to impressive outcomes in understanding language.