External ADC with Arduino
An external ADC is its own &quot;machine&quot; that runs separately from the Arduino and after it measures the analog signal, it sends that measurement data digitally to the Arduino, which has nothing to do with Arduino's 10 bit ADC. The Arduino doesn't measure anything in this case; It just receives data.
External ADCs can be much faster, much higher resolution, and/or lower noise. They can also have all sorts of exotic bells and whistles (higher voltage, isolated, bipolar voltage, simultaneous sampling, etc). You can also have two ADCs with same speed and resolution but different conversion methods which have different benefits.
The ADC you find on an MCU is usually the cheapest, simplest ADC the designers could get away with.