Character references are not properly entities at all. Character references are numeric and can be used without any special declaration. A character reference inserts the specified Unicode character directly into your document. Note that this does not guarantee that your processing or display system will be able to do anything useful with the character. Whether or not you can print that character is an entirely different issue.
Character references differ from other entity references in a subtle but significant way.
They are expanded immediately by the parser. In particular, this means you can't use the character reference in an attribute value to escape the quotation characters. External Entities External entities offer a mechanism for dividing your document up into logical chunks. Because external entities in different documents can refer to the same files on your file system, external entities provide an opportunity to implement reuse. Implementing reuse on a large scale requires an entity management system which XML, by itself, does not provide.