Visual Studio projects provide two options for handling resources: they can be linked (the default) or embedded. You can have both linked and embedded resources in a single project. However, most of the time you will want to choose one option for all resources in your project.

Linked resources are stored as files in the project; during compilation the resource data is taken from the files and added to the manifest for the application. The application's resource file (.resx) stores only a relative path or link to the file on disk.

With embedded resources, the resource data is stored directly in the .resx file in a text representation of the binary data. In either case, the resource data is compiled into the executable file.

You can change resources from linked to embedded by changing the Persistence property for the resource file.

[http://msdn.microsoft.com/en-us/library/ht9h2dk8.aspx]