Please refer to the data sheet of the concerned microcontroller you want to use, e.g for a PIC16F87xA page 145, section 14.2 gives you details about types of oscillators and configurations.
• LP Low-Power Crystal
• XT Crystal/Resonator
• HS High-Speed Crystal/Resonator
• RC Resistor/Capacitor
For other families of mcu refer to their respective datasheets.
XT mode means that you can use with crystals up to 4MHz (XTAL not EXTERNAL - this is the source of your confusion with the two letters) to form the PIC oscillator, but nothing is wrong if you use an external 2, 3 or 4MHz external signal clock coming from another oscillator into the osc input pin if XT mode is selected.