To save space in the drawing database (and in the DXF file), the points associated with each entity are expressed in terms of the entity's own object coordinate system (OCS). With OCS, the only additional information needed to describe the entity's position in 3D space are the 3D vector describing the Z axis of the OCS and the elevation value.
For a given Z axis (or extrusion) direction, there are an infinite number of coordinate systems, defined by translating the origin in 3D space and by rotating the X and Y axes around the Z axis. However, for the same Z axis direction, there is only one OCS. It has the following properties:
For some entities, the OCS is equivalent to the WCS, and all points (DXF groups 1037) are expressed in world coordinates. See the following table.
Coordinate systems associated with an entity type 


Entities 
Notes 
3D entities such as line, point, 3dface, 3D polyline, 3D vertex, 3D mesh, 3D mesh vertex 
These entities do not lie in a particular plane. All points are expressed in world coordinates. Of these entities, only lines and points can be extruded. Their extrusion direction can differ from the world Z axis 
2D entities such as circle, arc, solid, trace, text, attrib, attdef, shape, insert, 2D polyline, 2D vertex, lwpolyline, hatch, image 
These entities are planar in nature. All points are expressed in object coordinates. These entities can be extruded. Their extrusion direction can differ from the world Z axis 
Dimension 
Some of a dimension's points are expressed in WCS and some in OCS 
Viewport 
Expressed in world coordinates 
Once AutoCAD has established the OCS for a given entity, the OCS works as follows: The elevation value stored with an entity indicates how far to shift the XY plane along the Z axis (from the WCS origin) to make it coincide with the plane that contains the entity. How much of this is the userdefined elevation is unimportant.
Any 2D points entered through the UCS are transformed into the corresponding 2D points in the OCS, which is shifted and rotated with respect to the UCS.
These are a few ramifications of this process: