The main differences between linked objects and embedded objects are where the data is stored and how you update the data after you place it in the destination file.
Linked objects
When an object is linked, information is updated only if the source file is modified. Linked data is stored in the source file. The destination file stores only the location of the source file, and it displays a representation of the linked data. Use linked objects if file size is a consideration.
Linking is also useful when you want to include information that is maintained independently, such as data collected by a different department, and when you need to keep that information up-to-date in a Word document.
When you link to an Excel object, you can use the text and number formatting from Excel, or you can apply the formats supplied by Word. If you use the Word formats, you can preserve formatting when the data is updated. For example, you can change table layout, font size, and font color without losing those changes once the object in the source file is updated.
Embedded objects
When you embed an object, information in the destination file doesn't change if you modify the source file. Embedded objects become part of the destination file and, once inserted, are no longer part of the source file.
Because the information is totally contained in one Word document, embedding is useful when you want to distribute an online version of your document to people who don't have access to independently maintained worksheets.