A Replication Volume serves as a conduit for replications. You use a Replication Volume as the target of a Copy/Mirror/Migrate from a local volume, or you can map it directly to a server (requires a synchronous replication). Mapping a Replication Volume directly to a server creates a replication proxy -- all IO gets passed through the Compellent System, and no storage is consumed on the Compellent System.
You select the External Disk (or unassigned disk that is automatically converted to an External Disk) as the target for the Replication Volume. Reads and writes seen by the Replication Volume are passed to the External disk.
The size of the Replication Volume is inherited from the size of the selected External Disk.