You create an external reference when one document is dependent on
another document for its solution. If the referenced document changes, the dependent
document changes also.
In an assembly, you can create an in-context feature on one component that
references the geometry of another component. The in-context feature has an external
reference to the other component. If you change the geometry on the referenced
component, the associated in-context feature changes accordingly.
To list the external references on a part or feature, right-click the part or the
feature or right-click the update holder 
, and click External
References.
Rules for External References
- A component cannot have an external reference to itself (a
circular reference).
- You cannot reference one instance of a part to create a feature
on another instance of the same part, even if the instances are in different
configurations.
- You cannot replace a part with another part created by deriving
the second part from the first.