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The video explains word and sentence embeddings, which are essential for large language models. Language models aim to enable computers to understand and process language, but since computers handle numbers, word embeddings translate words into numerical representations. Each word corresponds to a list of numbers, and sentence embeddings do the same for sentences. This process is automated, typically using a neural network that analyzes context; words appearing together will have their numerical representations brought closer. This method results in effective and meaningful embeddings, allowing for advanced language processing.