From AutoCAD Help with additional notes -
Demand Load Xrefs -
Controls demand loading of xrefs. Demand loading improves performance by loading only the parts of the referenced drawing needed to regenerate the current drawing. This option is also controlled by the XLOADCTL system variable.
Disabled: Turns off demand loading. Other people can xref the drawing you have xref'd
Enabled: Turns on demand loading and improves AutoCAD performance. Select the Enabled setting to enhance the loading process when working with clipped xrefs that contain a spatial or layer index. When this option is selected, other users cannot edit the file while it is being referenced. No one can access or edit the xref drawing you have xref'd
Enabled with Copy: Turns on demand loading but uses a copy of the referenced drawing. Other users can edit the original drawing. Other people can xref the drawing you have xref'd and can modify the original drawing
I typically have the value set to Enabled with Copy.
If you have extremely large drawings (+10MB) and are using XCLIP to clip an xref'd drawing and your drawings are slowing down, you might want to use Disabled. But no one will be able to open, xref or edit the xref'd drawing.
I hope this helps.