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In this video tutorial by John on 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 this using an Excel table and named ranges. The process begins with selecting the source range in the products sheet, where users are instructed to insert a table by going to the Insert tab and selecting the table option (keyboard shortcut Ctrl + T). It's important to ensure the "My table has headers" checkbox is checked before confirming. The tutorial emphasizes the benefits of utilizing Excel tables to streamline data validation for lists.