When you insert an Excel file into a Word document, the data are -

Inserting objects across Microsoft Office applications relies heavily on OLE (Object Linking and Embedding) technology. Understanding the distinction between Embedding and Linking is vital:

Embedding (Default): When you navigate to Insert > Object and choose an Excel worksheet, the data is embedded. This means a complete, independent copy of that Excel file is saved inside the .docx file.

Key Characteristic: If you double-click the data within Word, you can edit it using Excel tools right there. However, any modifications you make will only exist inside the Word document. The original, external Excel file on your hard drive remains completely untouched. This increases the Word document's file size because it carries the entire Excel sheet inside it.