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In this tutorial, Clay Preston explains how to use shading and highlighting in Word. He demonstrates how to select a color, opting for yellow. For shading, he notes that it covers the entire line of text. To apply highlighting, he instructs users to reselect the word and use the paintbrush tool, which allows for the selection of any color. This method only highlights the specific word rather than the entire line. He concludes by inviting viewers to like the video and subscribe.