The ENTITY datatype is derived from the NCName type. : ENTITY « XML Schema « XML Tutorial

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3. ENTITY

The value of ENTITY must match an unparsed entity name declaration in a notation element in the schema.

<!-- schema -->
<xsd:notation name="jpg" public="image/jpg"
  system="JPG_viewer.exe"/>
<xsd:complexType name="entityref">
  <xsd:sequence>
   <xsd:element name="picture">
    <xsd:complexType>
     <xsd:complexContent>
      <xsd:extension base="xsd:anyType">
       <xsd:attribute name="image"type="xsd:ENTITY"/>
      </xsd:extension>
     </xsd:complexContent>
    </xsd:complexType>
   </xsd:element>
  </xsd:sequence>
</xsd:complexType>
<!-- instance document -->
<picture image="jpg">Brochure</picture>