What is the difference between external data and an integration dataset in Azure Synapse?

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What is "connect to external data"?

This provides the ability to connect to certain types of data sources - such as Azure Storage (Blob, ADLS Gen 2), CosmosDB (Mongo and NoSQL), and ADX (Kusto). Once a connection is created, the underlying data of that connection will be available for analysis in the Data hub for exploration, writing queries, etc. Also, a linked service is created upon creating a connection, so it is technically also possible to use that Linked Service in any pipeline.

What is an "integration dataset"?

This is very specific to Synapse Pipelines and ADF. In pipeline/ADF terminology, a linked service is a connection string to the underlying data source. An integration dataset (or simply called as Dataset), represents data structures within the data source, which simply point to or reference the data you want to use in your activities as inputs or outputs. Datasets identify data within different data stores, such as tables, files, folders, and documents. For example, an Azure Blob dataset specifies the blob container and folder in Blob Storage from which the activity should read the data.

I hope this information helps

Regards

Geetha