External files - sound files (mainly mp3 files), which are not embedded in swf file (file which contains the player). Sound files are located in a web folder. Making player using external files allows you to replace the files at any moment without changing player's swf file (the only condition is that the files' names mustn't be changed).

Embedded sound - sound file is embedded in swf file. Using this method, you should upload only the swf file to your website to publish the player. Sound file shouldn't be uploaded because the sound is already included with swf. Players of this type are the easiest to publish but the sound can't be changed after publishing without rebuilding swf file. Embedded sound usually means that player contains only one sound file.