To highlight a cell based on a condition in Excel, the IF function alone cannot change cell colors. Instead, users should utilize Conditional Formatting, which allows for automatic color changes based on specified criteria. For example, to highlight a cell if its value exceeds 100, Conditional Formatting can be set to apply a specific color when the condition is met. Additionally, users can change the text color within a cell using Conditional Formatting by setting rules that define when the text color should change based on the cell's value. This method provides a flexible way to visually represent data based on conditions.