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The video tutorial explains how to remove unwanted spacing in a document that was converted from a dot lit file format to Microsoft Word. By using advanced find and replace, viewers can eliminate spacing issues caused by hard returns and extra spaces. By turning on the show/hide feature, non-printing characters are revealed, allowing users to identify the problem areas. Regular spaces are represented by black dots, while hard returns are identified as hard return space. Adjusting the zoom level can help users better visualize and fix the spacing discrepancies.