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In this video tutorial, Matt explains how gift certificates work on a website. Customers receive a unique code upon purchasing a gift certificate, which they can use during checkout. Matt demonstrates how to view and manage gift certificates on the website, including selling them over the phone. By accessing the gift certificates area, you can see the ones purchased and view detailed information. To track usage, codes can be included in reports to see running totals and usage details. By running a report in the customers gift codes section, you can gain insights into the usage of gift certificates.