The ‘Position’ setting is always to be found in applique designs – otherwise they would not be applique. The position of the fabric is sewn down, and then the applique is applied.
Using this information we can do some additional things in the software:
Generate a fabric simulation: The fabric is simulated using the chosen color of the object. You can change this setting, and the color itself ‘live’ in the window to preview the results. When you find a suitable setting, you can click ‘OK’.
If you have StitchArtist, you can do more, as described in the section, Photo Applique.
The type of stitching is important for the operation of the applique discovery process in the software. Generally, applique position steps are made from single running stitches, which may jump to other sections and/or holes. Most digitizers will do this simple run, and then add tie-off stitches at the beginning and end of each outline. Sometimes the outlines will not close perfectly, but the software overcomes this, as well as the tie-offs. But if the digitizer uses some other stitch, it is possible that the process will not be recognized as an applique when you want it to. The easy way to check is to turn on the fabric simulation. If that looks correct, you are good to go.
Also note that the program is not converting filled sections into appliques. That must be done by the digitizer who created the design. This applique discovery process is to make using existing applique designs easier and more fun.