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In this video, Phillip Burton demonstrates how to replace a part of a string in programming using the replace function. He begins with the string "hello there philip" and shows how to change it to "hello there john" easily. He explains that one can utilize the substring method to extract portions of a string and replace parts, but the replace function provides a more straightforward approach. To use it, you start with the original string, identify the text to be replaced, and define the replacement text. This method is practical for bulk replacements, such as substituting numerous names in a large dataset.