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In this video, Phillip Burton from filecats.co.uk discusses how to replace parts of a string using the replace function. He demonstrates starting with the string "hello there philip" and replacing "philip" with "john," resulting in "hello there john." The replace function requires the original string, the target substring to find, and the replacement substring. Burton notes that this function is particularly useful for replacing placeholders, such as a hash or pound sign, in larger datasets that contain multiple names. He suggests this technique can simplify the process of modifying numerous strings efficiently.