This means that the replacement text of an entity (except when in an attribute value or entity declaration, see below) is processed as if it were part of the document; in particular, this means that it can contain other entity references, which are processed recursively. This means that in the following:
<!ENTITY AC "The &W3C; Advisory Council">
<!ENTITY W3C "WWW Consortium">
The reference &AC; would result in the string The WWW Consortium Advisory Council appearing as character data in the document.
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