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The tutorial discusses the application of paragraph rules and shading in text formatting. It clarifies that these features only work at the paragraph level and cannot be applied to selected text within a paragraph. To create a highlight effect, a character-level method is used instead. The tutorial demonstrates highlighting specific words (like "ham," "turkey," and "pastrami") by selecting them along with adjoining spaces, then using the character panel to access underline options. With the preview enabled, users can toggle the underline on, change its color (e.g., to magenta), and adjust the weight of the underline for better visibility.