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In this tutorial, Clay Preston explains how to use shading and highlighting in Word. He begins by selecting a color for shading, opting for yellow, and demonstrates how to apply it, noting that it covers the entire line. For highlighting, he shows how to select a word, then use the paintbrush tool to choose a color (again, using yellow) to highlight only the selected word without affecting the entire line. He concludes by encouraging viewers to like and subscribe if they enjoyed the video.