Confused on how attachment embeds work

Sorry if this has been mentioned elsewhere, I’ve tried searching with no luck. So I’ve got my vault set up and I’ve got it set to keep attachments “in subfolder under current folder”. That works great. I’ve found that I can move the attachments out of that folder and the preview still works correctly. The link in the doc doesn’t change either and it all still works. I’m finding this very confusing. Makes it seem that attachments can live anywhere and there is some magic behind the scenes with the paths. Can anyone explain what is going on?

I think it is the same as with normal Markdown references. The files are found everywhere in the vault. Obsidian only adds as much of the path as needed to disambiguate.

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Interesting. Makes sense too. Thanks for the response.