External members are, typically, members from outside your organization; for example, professional service firms often seek to invite their end-clients into their Method Grid account with access limited to a particular grid or folder. These end-clients are best added as external members.
External members have curtailed rights; they can only be assigned "view" and "edit" permissions and never "manage" permissions. External members are also not able to view the account-wide members and group pages. The only members (profile pages) they can view are those that are tagged as experts in grids that they have access to or members that have access to the same folders or grids as they do.
External members can only view/edit the folders and grids that they have been granted access to; external members can, however, access their own private grids folder.
See "How do I invite and manage external members into my account?".