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In this video, Phillip Burton from filecats.cod.uk demonstrates how to replace a part of a string using the replace function. He starts with the string "hello there philip" and shows how to change it to "hello there john" easily. Although substring extraction is an option, the replace function simplifies the process by requiring the initial string, the target substring to find, and the replacement substring. He highlights common use cases, such as replacing placeholder symbols like hashes with names in large datasets. The video sets up for further exploration of string manipulation methods.