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The video tutorial introduces functional encryption, starting with a review of public key encryption. It explains the roles of two parties, Alice and Bob, where Bob generates a public and private key pair. Alice uses Bob's public key to encrypt a message (m), creating ciphertext (c) that she sends to Bob over a public channel. Bob then decrypts the ciphertext with his secret key (sk) to retrieve the original message. While this outlines the public key encryption scheme, it suggests there are drawbacks to this approach if the right key is not used.