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In this tutorial, Clay Preston demonstrates how to use shading and highlighting in Word. He first explains how to select colors for shading, opting for yellow. When applying shading, it covers the entire line of text. For highlighting, he shows how to choose the word and then use the paintbrush tool to apply color, ensuring that only the selected word is highlighted, not the entire line. He encourages viewers to explore color choices and thanks them for watching, inviting them to like and subscribe if they enjoyed the content.