The figure shows the following: XML schema 2, S2 references XML schema 1, S1 and also XML schema 3, S3 XML schema 1, S1 references XML schema 3, S3.
or (depicted in the lower half)
XML schema 1, xm40 references XML schema 2, xm40a. Also, XML schema 2, 40a references XML schema 1, 40.