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Data extraction refers to the process of retrieving data from one format and transforming it into a more useful format for further processing. This process is crucial for unlocking the value of data, which exists in various formats across web pages and printed materials. After extracting data from different sources, it may be necessary to review and ensure that the data sets are consistently formatted for effective use. The video tutorial by Parsup will discuss what data extraction is, its applications, and methods for performing it, emphasizing the distinctions between extraction and subsequent data processing or analysis.