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This lecture covers the formal description of Finite State Machines (FSMs) in digital system design, focusing on Mealy and Moore FSMs. It explains the state diagrams, state tables, and VHDL implementation of FSMs. The instructor discusses the rules for valid FSMs, state encoding, state register description, and timing diagrams. Emphasis is placed on the importance of unambiguous next-state and output functions, as well as the impact of incomplete conditions in FSM specifications.