When we attach external Reference(xref), there are two reference types: Attachment and Overlay, as shown in the following picture,

Attachment

If we choose Attachment type, then any xref that’s inserted into our drawing will carry through to the next one drawing when we xref your drawing into another drawing.

Overlay

Instead, if you choose Overlay type, then the xref that’s inserted into our drawing file will not carry through to the next drawing.

For example, if we xref A drawing file into B drawing file using Attachment, and when we xref B drawing file into C drawing file, the system automatically carries A drawing file.

However, if we xref X drawing file into B drawing file using Overlay, and when we xref B drawing file into C drawing file, we lose the A drawing file because we only xref B this time and the system won’t automatically carry through A.