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The tactic that Malcolm uses is to have everyone in his army cut a branch from a tree in Birnam Wood and use the branch for camouflage. The hope is that people seeing the army from a distance will mistake it for a forest (seems like an odd ploy since people ought to know where the forest should and should not be).
The significance for the play is that it fulfills the witches' prophecy. They said that Macbeth could not be defeated until Great Birnam Wood came to Dunsinane. When Malcolm has his army cut the branches, Birnam Wood is coming to Dunsinane and Macbeth will soon be defeated.
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