Counting words in a file efficiently involves reading data in manageable chunks rather than loading the entire file into memory. By modifying a function to rename it from `print file contents` to `count words in file`, a variable is created to store the word count, incremented by leveraging the `fields` function from the strings package. However, challenges arise when words are split across buffer boundaries, resulting in double counting, especially with smaller buffer sizes. A proposed solution involves tracking whether the reading is within a word by checking the leading and trailing buffer characters, adjusting the count accordingly. The solution is further refined by utilizing the `unicode.isSpace` function to account for various whitespace characters beyond just spaces and newlines. This approach ensures accurate word counting while handling potential complications from Unicode characters. The necessity of developing a robust algorithm highlights the complexity of text processing in programming, paving the way for deeper discussion in subsequent lessons.