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In this tutorial, John from Excel Campus explains how to create dynamic data validation lists in Excel that automatically update when new items are added to the source range. He demonstrates this using Excel tables and named ranges. The process begins by navigating to the source range (the products sheet) and inserting a table by selecting the "Insert" tab and choosing "Table" (shortcut: Ctrl + T). It's important to ensure that the "My table has headers" checkbox is checked before clicking OK. This action creates a table and assigns it a name, which can also be modified. John indicates that further details can be found in another video on getting started with Excel tables.