What is the difference between a normal SharePoint list and External List?

An external list is unlike other SharePoint lists. Strictly speaking, it is not a SharePoint list at all because it doesn’t store information inside it. An external list is a view on external data—that is, data that is contained not within SharePoint but in external databases and systems.

When you add external lists to SharePoint sites, they are displayed in an interface that looks almost exactly like a regular SharePoint list. An external list also allows most of the same interactions with the items in the list that are offered with a regular SharePoint list.

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