Reference and Inline Blocks
Reference blocks are blocks that are included in the library system. Inline blocks are blocks that are not included in the library system.
All of the blocks in the installed library palettes are reference blocks. When a block from a palette is added to a diagram, the definition of the block resides in the block library, and not in the model file associated with the diagram. The model file contains only a reference to the library.
When a block in a diagram is user-defined or imported from a source outside of the library, the definition of the block is stored directly in the model file, *.scm, that belongs to the diagram. For example, a user-created super block is inlined as its definition is fully made within the model and there is no reference to a library file. However, if such a super block is masked, the masking operation creates a .scb file, which can be added to the library and later referenced.
Breaking a Block's Reference to a Library
The Inline option breaks a reference to a library.