Autodesk AUTOCAD 2006 Command Reference Manual page 528

Island Detection
Controls whether internal closed boundaries, called islands, are detected.
New
Prompts you to select the objects that define the boundary set.
Normal
Hatches or fills inward from the outer boundary. If HATCH encounters an
internal island, it turns off hatching or filling until it encounters another
island within the island. You can also set the Normal style by adding ,N to
the pattern name in the HPNAME system variable.
Object Type
Controls the type of the new boundary object. The resulting boundary
object can be a region or a polyline object. This option is available only if
Retain Boundaries is checked.
For more information about regions, see "Create and Combine Areas
(Regions)" in the User's Guide.
Outer
Hatches or fills inward from the outer boundary. HATCH turns hatching
or filling off if it encounters an internal island. This option hatches or fills
only the outermost level of the structure and leaves the internal structure
blank. You can also set the Outer style by adding ,O to the pattern name
in the HPNAME system variable.
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