The XRef Objects dialog enables you to choose to Merge Transforms, Merge Materials, and Merge Manipulators.
If the Merge Manipulators toggle is off before you click Create XRef Record From File, manipulators applied to XRef objects are linked to the (externally referenced) source file. In a similar way, the Modifiers drop-down list gives you three alternatives for how to handle object modifiers.
If the Merge Materials toggle is off before you click Create XRef Record From File, materials applied to XRef objects are linked to the (externally referenced) source file. If Merge Materials is on, the materials are merged with the main scene.
If the Merge Transforms toggle is off before you click Create XRef Record From File, transforms applied to XRef objects are linked to the (externally referenced) source file and cannot be keyframed in the main file. If Merge Transforms is on, the transforms are merged with the main scene and can be keyframed.
You can choose as many as you want by holding down the Ctrl key and highlighting them in the list. If the source scene has a lot of object types you don't need to include, you can filter the list by using the List Types radio buttons. Use the All button to select all of the entries, the None button to select no entries and the Invert button to highlight the opposite of your current selection. You can also choose to display Influences and Select Influences.