You can link entire drawings to the current drawing as external references. Unlike inserting a drawing as a block, in which you add all the entities from the separate drawing into the current drawing, external references attach a pointer to the external file. The entities in the external reference appear in the current drawing, but the entities themselves are not added to the drawing. Thus, attaching an external reference does not significantly increase the size of the current drawing file.
External references provide additional capabilities not available when you insert a drawing as a block. When you insert a drawing as a block, the entities are stored in the drawing. Any changes you make to the original drawing are not reflected in the drawing in which you inserted it. When you attach an external reference, however, any changes you make to the original drawing file are reflected in the drawings that reference it. These changes appear automatically each time you open the drawing containing the external reference. If you know that the original drawing was modified, you can reload the external reference anytime you're working on the drawing.
External references are useful for assembling master drawings from component drawings. Use external references to coordinate your work with others in a group. External references help reduce drawing file size and ensure that you are always working with the most recent version of a drawing.
The Xref command attaches DWG files to the current drawing through the Drawing Explorer (short for "external reference").
The -Xref command attaches DWG files to the current drawing through the command bar.
The Xattach command attaches externally-referenced drawings through a dialog box (short for "external attach").
The Xclip command clips externally-referenced drawings, and adjust front and rear clipping planes (short for "xref clip").
The XDWGFADECTL system variable controls the fading of external references. Values between 0 (no fading) and 90 are accepted.
The fading factor affects the screen display only, not the printing.
External References (elevations) display faded: XDWGFADECTL + 50
The XNOTIFYTIME system variable defines the frequency to check for modified externally referenced resources: xrefs, images and pdf attachments if XREFNOTIFY, IMAGENOTIFY and/or PDFNOTIFY is ON.
The XREFNOTIFY system variable controls whether warnings for missing or modified xrefs are issued.