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In this video tutorial, the instructor demonstrates how to use custom number formatting to properly format telephone numbers in a spreadsheet. This is particularly helpful for maintaining consistency when entering information like phone numbers, emails, and addresses. By creating a custom number format, users can ensure that phone numbers are displayed in a visually pleasing and consistent way. The process involves accessing the cell's format options, selecting custom number format, and inputting the desired format, such as parentheses and hashtags.