Have you ever seen those cute Russian dolls? You know, the hollow doll that you open to find another smaller doll inside? And then you open that one to find an even smaller doll inside? And then you open that doll. . . .
Illustrator enables you to create the digital equivalent of those Russian dolls. You place a Photoshop image into Illustrator, rotate the image, add text over the image, and save the whole thing as an Illustrator file. To add more, create a new document in Illustrator, placing the previously created Illustrator graphic (which also contains within it a Photoshop file) into the new document by using the File→Place command. You save this Photoshop file within an Illustrator file within another Illustrator file as an EPS file and place it within a page layout document. You have a Photoshop file now embedded four layers deep within the page layout document. (Dizzy yet?)
Although nothing prevents you from creating the digital equivalent of a Russian doll, editing the file is very difficult. A better method is to open Illustrator files and copy them into a document rather than placing them, especially if you want to do edits later on.
Subscribe to the KISS method: Keep It Simple, Sillygoose! Avoid going more than three places from the original file (such as a Photoshop file placed inside an Illustrator file, placed inside an InDesign document, with scaling happening in only one of those places). Two places are even better if you can limit yourself. If you need to bring Illustrator data from one Illustrator document to another, open both documents and copy and paste the info rather than place it.