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In the video tutorial by Erin from TechSmith, viewers learn how to extract text from images, PDFs, screenshots, or scanned documents using Snagit. To begin, switch to the image tab in the capture window, and select "Grab Text" from the dropdown menu. After clicking the Capture button, select the desired text. Snagit utilizes Optical Character Recognition (OCR) to capture any visible text on the screen, and a pop-up will display all extracted text for copying and pasting. If the image has already been captured without using the Grab Text feature, it's still possible to extract text by taking a picture or scanning a printed document to create a digital copy.