An annotation view is a view that is generated from a component for the explicit purpose of annotating it.
Annotation views are associative, and whenever the part or assembly changes in model space, the annotation view automatically updates. If the annotation view is annotated using objects such as dimensions, parts lists and balloons, they automatically reflect the change. In the mechanical browser, annotation views are indicated by the 
icon.
Annotation Views in Layout
The ability to place annotation views in a layout makes it possible to use model space exclusively for designing and layouts for detailing/annotating. Although annotation views are primarily designed for use in layout, they can be used in model space, too.
Subviews and Subview Labels
Similar to how a component contains component views, an annotation view contains subviews. The subview corresponds to the component view of the component the annotation view is generated for. AutoCAD Mechanical toolset can automatically generate a label for each subview at the time you place an annotation view in the drawing area. The label is derived from a formula and the label text height is controlled by the drafting standard settings.
Annotation Views as External References
Similar to how you create external references to components, you can create external references to annotation views. Hence, if you have a fully annotated annotation view of a part or assembly in a dwg file, you can reuse it across other drawings.
With the exception of the scale, any modifications you make to the annotation view is written back to the source. As such, if you modify an annotation within the annotation view, the source dwg file as well as all other dwg files that refer to this annotation view reflect the change. If you want to change an annotations without impacting the source dwg, you can localize the annotation view. The annotation view thus becomes a local annotation view of an external component. This enables you to modify the annotations within the annotation view without impacting any other dwg files.
Local annotation views of xref components can only externalized back to the source drawing.