Knowing the difference between an overlaid Xref and an attached Xref is important when you reference a file that has other files referenced into it. If the files are attached, then when you reference the file they are overlaid in into another file, the attached files will appear in that file as well. If the files are overlaid into a file, then when you reference that file into another file, the overlaid files will not appear.
This screen shows the Xref Manager with one drawing attached and two drawings overlaid. Note that you can change the type between overlay and attachment by double-clicking on the word “Attach” or “Overlay” in the Type column.
If we then reference the drawing above (called “Drawing2”) into a new drawing, we can see that only “Attached Xref 1” is displayed in the new drawing.
This view is called the Tree View, by the way. It is useful to see where your attached Xrefs are referenced from. To switch between Tree View and List View, just use the buttons in the upper left corner of the Xref Manager.
Generally, Xref Overlays are preferred to attachments, especially when using xrefs in xrefs. This will avoid creating xrefs that load up ancillary xrefs upon being referenced into a sheet file. You have to ask yourself if you really need to attach an xref, and if the answer is no, you should overlay it.