Any package that appears under your Project’s Packages folder is embedded in that Project. Typically, when you create a new package, you embed it in your Project while you are developing it. When it is ready to be shared with other users and tested in other Projects, you can publish it to a scoped package registry.
Embedded packages do not need to appear in the Project manifestEach Unity Project has a Project manifest, which acts as an entry point for the Package Manager. This file must be available in the <project>/Packages directory. The Package Manager uses it to configure many things, including a list of dependencies for that Project, as well as any package repository to query for packages. More info
See in Glossary as a dependency. If they do, the package on disk takes precedence over the version of the package listed as a dependency. For example, if the Project manifest specifies a dependency on version 1.3.1 of Package X but the Project also has an embedded packageAn embedded package is a package that you store under the Packages directory at the root of a Unity Project. This differs from most packages which you download from the package server. More info
See in Glossary with that name, the Package Manager uses the embedded package, regardless of its apparent version, instead of downloading the more recent version from the registry.
It is your responsibility to track the content of your embedded packages, and any changes you make to it. If your Unity Project is under source control, you should also add packages embedded in that Project to the same source control.