When you convert a fragment reference, it becomes an embedded copy of the fragment, and the fragment metadata is removed. The embedded object does not retain any relationship to the fragment source file. The fragment source file is unchanged and you can still reference it in your forms.
Converting a fragment reference is useful when you no longer need to reference the fragment, but you do not want to remove the objects from a form design. For example, you can convert a fragment reference if you want to create a new fragment based on an existing fragment.
If the referenced fragment contains one or more fragment references, you can either embed only the selected fragment reference or embed the selected fragment and the nested fragment references.
See also 

To convert a fragment reference to an embedded object