In this video (Linked Smart Objects in Photoshop), you’ll learn when to embed and when to link Smart Objects, as well as how to update modified content, resolve missing files, and filter layers based on Smart Object attributes.
Note: at 7:21 I say that you can’t change an embedded Smart Object to a linked Smart Object (because this video was recorded before the 2014 release of Photoshop). However, if you run the update to the 2014 release of Photoshop you can now convert from embedded to linked and vice versa!
In addition, here are a few of the shortcuts that I mentioned in the video:
• Drag and drop a file from Bridge to an open document in Photoshop to create an embedded Smart Object.
• Option + (Mac) | Alt + (Win) drag and drop a file from Bridge to an open document in Photoshop to create a linked Smart Object. Note: this shortcut will also work if you drag and drop from Lightroom into an open Photoshop document on the Mac.
• Command + Option + Shift + E (Mac) | Control + Alt + Shift + E (Win) will edit the contents of a Smart Object.
• Shift -double click a raw file in Bridge to open it in Photoshop while bypassing the Camera Raw dialog.
Also, if you lose the linked smart object (or the linked smart object is off-line), Photoshop will still be able to print the document with high quality at the same size as it was saved (or smaller) because Photoshop includes a flattened version of the entire document within the PSD or TIFF file when saved (be sure to enable the option to Maximize PSD and PSB File Compatibility in the File Handling Preferences). This also means that even if the file is linked, you’re going to see a file size increase.