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In a nutshell, bile is a chemical produced by your liver. It's stored in your gallbladder and it breaks down the fat molecules so they can't bind together during digestion. They're then swept through and processed/excreted with everything else.
Here's his experiment page:
And here's how he did the experiment. Please note that the food coloring is there specifically to help you see the fat moving within the liquid, with the dish soap acting as the bile in this example.
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