external code can be:
a dynamic library (.dlyb) which can be distributed as a framework and installed on the machine. But be aware, that you can't install frameworks on the iPhone - your app is sandboxed. A set number of frameworks are available to you which are on all iPhones.
you can also consume a static library. a static library is compiled into your apps binary during linking.
links:
http://blog.carbonfive.com/2011/04/04/using-open-source-static-libraries-in-xcode-4/
The other and fairly common form is consuming code. It's common in iPhone development because how closed the device is and how sandboxed your app is. it's also popular because many components and libraries are open sourced on github. sharing code usually comes in two forms:
copy code - add some files to your app and off you go. you have to update files on some perioding basis.
xcode sub-project - you can add an external libraries xcode project as a sub-project to your project. that sub-project can produce a static library (target) which your app consumes. in xcode4, you can also have a workspace which contains multiple projects.
Consuming code has the benefit of being able to debug into it. The more complex the code becomes, the more attractive consuming a sub-project is. If it's a handful of self-contained files, then just adding the files is simple.
hope that helps some.
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