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Substitution is a function whereby, when an editor saves a page, an item in the wikicode is permanently replaced with its current value. In particular, templates and magic words can be substituted, as an alternative to transclusion. The difference is that when a template is substituted on a page, its appearance on that page will no longer be affected by later changes made to the template itself (as is the case in a transcluded template).
Substitution is done using the subst: modifier after the double opening braces. For example, to substitute the template {{afd}}, type {{subst:afd}}. You can check the resulting wikitext before saving by clicking "Show changes" (and see what the page will look like by clicking "Show preview").
Variables and parser functions can also be substituted, meaning that their current value will be recorded permanently on the page – they will not be re-evaluated whenever someone views the page.