An embedded system is a computer that lives inside another device and acts as a component of that device. For example, current cars have an embedded computer under the hood that helps regulate much of their day to day operation.
An embedded file is a file that lives inside another and acts as a portion of that file. This is frequently seen with HTML files having embedded audio files; audio files often embedded in HTML include AU files, MIDI files, SID files, WAV files, AIFF files, and MOD files. Most browsers will ignore these files unless an appropriate plug-in is present.