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Adding a document embeds the document which means the person can scroll on the document in the website.
Adding a document via the Drive shortcut embeds the document which means the visitor can scroll and interact with the document in the website.
The document would need to be uploaded to your Google Drive to add to the site. It is also better if it is in a non-editable format like a PDF.
Just like adding a normal link, you can use any of the three ways to add a link. Make sure your document security permissions allow anyone to view the document otherwise visitors will not be able to view it. This also applies for any forms you want to add.