Conditional formatting in Excel allows you to dynamically format cells based on custom rules that you set, making large data sets easier to digest. To use conditional formatting, select a range, create a rule by specifying a condition and formatting style, and apply it to the selected range. There are several types of conditional formatting rules, including highlight cell rules, top/bottom rules, and dynamic features like data bars, color scales, and icon sets. These rules can be used to visualize data, identify trends, and automate tasks. By using conditional formatting, users can create more engaging and interactive spreadsheets that help them make sense of their data.