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In this video tutorial, Ashwin explains how to standardize data using the z-score method. This method involves subtracting the mean from a value and then dividing it by the standard deviation. The scaled value helps keep the data within a standard deviation range of -1 to +1, with a mean of 0. Ashwin demonstrates this process using the wine quality dataset. By applying standardization, the data is represented in a normal distribution within a specified range. This process helps in analyzing data efficiently.