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In this tutorial, Clay Preston explains how to use shading and highlighting features in Microsoft Word. He starts by selecting a color for shading, choosing yellow as his preference. When applying shading, it covers the entire line of text. For highlighting, he demonstrates how to highlight individual words using the paintbrush icon, which allows for more precision in color selection without affecting the entire line. He encourages viewers to experiment with different colors and concludes by inviting them to like and subscribe if they enjoyed the video.