Notepad is a text editor, which means it can create and edit simple text files. It does not support formatting, and if you try to open something like a Word document, you will just get rubbish. WordPad has a similar function but supports formatted text as well.
Notepad can only handle small files (below about 60,000 letters). If you try to open anything larger, it will ask you if you want to open it using WordPad (say Yes).
You can undo the last thing you did using Notepad, but if you try undoing again it just redoes it (this is a good reason for using a different program such as WordPad instead). Notepad allows you to search using the "Search" menu, and cut/copy/paste using the "Edit" menu.
Notepad is very basic and can't do much. It is most useful as a temporary place to keep some sort of notes - text can be copied there using the clipboard then pasted somewhere else later.
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