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I use an external reference as a basic drawing, if something is always the same but can change as well, then you only have to chance the external reference and the basics of every drawing in which the reference is attached is up to date.
An overlay is more especially for one drawing.
I agreed to answer added by Mr.Wolf
Similarities
Attachments and overlays are referenced to host drawing files. The attachment or overlay imported into the host drawing comes from a source file. The attach command inserts external references and graphics into drawing files. Xref attachments require an attachment and a path type. Source file references can use a full path that includes all folders listed in the file path. Relative paths reference the source drawing based on the host file’s location. Xrefs do not require a path if the source drawing is kept in the same folder as the host drawing. Both attachments and overlays require an insertion point and scale.
Attachment type
The Attach Image dialog box is used to insert images, such as architectural blocks and PDFs, into an AutoCAD drawing. Using the Attach tool on the Reference panel to attach images and files to a drawing does not create an external reference. If the image to be attached is not located in the same folder as the host drawing, the path for the attachment is entered into the dialog box. Updating an xref also updates the drawings in which the xref is attached. The latest saved version of the externally referenced attachment is used by AutoCAD. Such attachments as drawing blocks are not similarly updated when their source files are changed. Attachments are displayed along with the host drawing when copied or printed. Use the tree view in the External References Manager to review the sources of attachments and look for circular references. Circular external references can generate errors and prevent a drawing from plotting correctly.
Overlay type
Circular external references cannot occur with overlays because overlays remain separate from the host drawing. If the xref is imported as an overlay, overlays within the imported xref are not imported with it. A multi-layer drawing with references to other xrefs will not carry the nested or child references into the new, host drawing.
I agree with Mr. Kinsbergen; Mr. Shakeel has a very comprehensive post on this subject
Endorsing answers given by other experts
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