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From Odwiki

This option causes a copy of each referenced .otl file to be stored inside your .hip file. Thus, if the external resource dissapears, your .hip file will still work. This can also be really useful if you're sending your .hip file to someone else who doesn't have direct access to your .otl setups.

This option is both great and as currently implemented but can be extremely dangerous (see OTLPitfalls).

Besides the workflow/pipeline considerations, this also serves to keep the size of your hip files down and therefore speed up saving and keep disk usage low.

It is possible to either manually or via a script, embed any OTL definitions into the hip file if you need to send it somewhere. This is done by saving the operator defination to "Embedded", which is a keyword for Houdini to save it into the hip file. This can be done with the OperatorTypeManager or with the otcopy hscript command.