The physical location of an entity is very important in determining how it's referenced in XML documents. So far, you've learned about general and parameter entities, both of which are considered internal entities because their content is declared directly within an XML document. The value of an internal entity is included directly in the entity declaration. Entity content can also be located outside of a document, in which case the entity is known as an external entity. External entities are still declared from within a document, but they reference other files for their actual content.
By definition, any entity that is not internal must be external. This means that an external entity is stored outside of the document ...