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In this tutorial, Phillip Burton demonstrates how to replace part of a string using the replace function in programming. He starts with an example string, "hello there philip," and shows how to change it to "hello there john" easily. He highlights that the replace function requires the initial string, the target substring to find, and the replacement substring. Additionally, he mentions the common use of placeholders, like hash symbols, for replacing multiple names in a larger dataset. By using the replace function, multiple occurrences can be modified efficiently, illustrating its effectiveness in handling strings in programming.