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In this video tutorial by John from Excel Campus, he explains how to create dynamic data validation lists that automatically update when new items are added to the source range. He demonstrates the process using Excel tables and named ranges. First, he navigates to the products sheet and inserts a table by using the Insert tab and selecting "Table" (keyboard shortcut Ctrl + T). It's important to ensure the "My table has headers" checkbox is checked before clicking OK. The video emphasizes that the table will allow for automatic inclusion of new items in the data validation list, streamlining data management in Excel.