Xrefs can be nested in another xref and attached to current drawing.
Xrefs that are multiple nested can be attached into the drawing. In the process of attaching, you can select insertion position, scaling factor and rotation angle for xrefs.
As the following illustration shows, master.dwg contains a.dwg and b.dwg. And drawing a.dwg contains c.dwg. Thus, In master.dwg, c.dwg is a nested xref.
Specify the type of xref, including attach and overlay. Using overlay to exclude any nested xrefs rather than overlay xrefs. This type is typically used for sharing data in network.In Xrefs that are attached in overlay type, you can viewed relative methods directly between the drawing and other grouping drawings.
In the following illustration,attach master.dwg to multiple drawings as xref. Users who are working with a.dwg need to view and use objects drawn on b.dwg without but not reference the drawing b.dwg because it would then appear twice in master.dwg. Instead, this may overlay b.dwg but mot make it included when a.dwg is referenced by master.dwg.
Relative Saved Paths and Nested Xrefs
You can specify saving path individually for the xrefs that are attached to the drawing in Xref Manager dialog box. You can select the saving path as full path, relative path or no path.
If the xref to be attached is a nested xref, its relative saving path means the position relative to the host computer.
XREF: Controls external references to drawing files
System Variables Reference