Select Relative Path as the path type when creating xrefs. Where all document users share the same network environment, use UNC (universal naming convention) paths to provide a flexible but accurate path to each referenced file.
Xrefs are best used when you will not need to manipulate objects within the referenced file. For example, when you import drawings of adjoining surfaces into plan sets. Also, xrefs are a good way to display parcels or other polygonal data as an overlay to a design.