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In this tutorial, Clay Preston explains how to use shading and highlighting in Word. He starts by selecting a color for shading, suggesting yellow for its appealing look. To shade, he instructs users to hover over the word and use the bucket icon to apply the chosen color, which colors the entire line. For highlighting, he recommends selecting the word again, using the paintbrush icon, choosing a color (like yellow), which highlights only the specific word without affecting the entire line. He concludes by inviting viewers to like and subscribe if they enjoyed the video.