The following illustrations show the difference between attaching and overlaying. The upper sets of illustrations show the type of xref used. The lower sets show what you see on your screen when you open each file.
In the “Attached xrefs” illustration, trees.dwg is attached to topo.dwg. Topo.dwg is either attached to or overlaid on house.dwg. Notice that when you open house.dwg, you also see both trees.dwg and topo.dwg. You see trees.dwg because it is attached. You see topo.dwg because it is overlaid and is no more than one level of xref from house.dwg.
Attached xrefs
In the “Overlaid xrefs” illustration, trees.dwg is overlaid on topo.dwg. Topo.dwg is either attached to or overlaid on house.dwg. Notice that when you open house.dwg, you see only topo.dwg and house.dwg. You do not see trees.dwg, because it is overlaid, not attached, and is more than one level of xref away from house.dwg.
Overlaid xrefs