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In this tutorial, John from Excel Campus explains how to use groups and outlines in Excel. He demonstrates with a formatted income statement, showing how to collapse and expand groups of rows using a button beside the row headers. To apply grouping, users should select the desired rows, go to the Data tab in the ribbon, and click the "Group" button in the Outline section. This action creates a collapsible group, allowing users to hide or reveal the selected rows. John notes that this grouping feature is also applicable to columns, enhancing data organization and visibility in Excel.