Using YouTube videos in Google Hangouts can enhance collaboration for both instructors and learners. Videos can be used by instructors to provide mini-lessons, demonstrations, and assigned projects for students to discuss. Learners can collaborate on team projects by researching and presenting different topics or videos on the same subject. The process involves opening a Google Hangout, searching for a video on YouTube, playing it within the Hangout, and pausing to discuss or collaborate using chat.