(A) Insertion vector method. Sequences within the locus are duplicated, and marker is inserted at the homologous site.
(B) Replacement vector method. This is most commonly used for gene targeting. A double recombination or gene conversion event can result in replacement of internal sequences within the chromosomal gene by homologous sequences from the vector, including the marker gene.
from Strachan and Read, Human Molecular Genetics 2, Wiley-Liss, New York, 1999 (on reserve)