The act of creating a search, report, dataset, or other knowledge object that is built upon a reference to another dataset. This reference means that the object always "looks back" to the original dataset for its foundational data. If the definition of the original dataset changes, those changes are passed down to any datasets that extend it as well.
Dataset extension is not the same as dataset cloning. When you clone a dataset, you create a distinct, individual dataset that is identical to the original dataset but not otherwise connected to it. When you extend a dataset, you create a dataset, report, dashboard panel, or alert that is bound to the original dataset through its reference to that dataset.
For more information
In the Knowledge Manager Manual