As with XRef objects, the material resides in a separate source file. When you change the material in the source file and then save that scene, the material's appearance can change in the main file that contains the XRef.
Typically you use this feature in conjunction with XRef Objects: When you add XRef objects, and the Merge Materials checkbox is off, then merged objects have an XRef material applied to them.
You can use the Override Material rollout to assign a local material to the XRef'd object.
The Show Map In Viewport button works for an XRef material only if the same button is turned on in the source file. Otherwise, it is disabled.