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In this Excel tutorial, John explains how to create dynamic data validation lists that automatically update as new items are added to a source range. He demonstrates using Excel tables and named ranges to achieve this functionality. The process begins by selecting the source range on the products sheet and inserting a table using the insert tab or the keyboard shortcut Ctrl + T. It's important to ensure the "My table has headers" checkbox is checked before finalizing the table insertion. The tutorial also mentions that viewers can find more information in another related video on getting started with Excel tables.