How Style Sheets Work
The choice of style sheet for a notebook is set with the notebook option StyleDefinitions. For a private style sheet, the option is StyleDefinitions -> Notebook[expr], where Notebook[expr] is the style sheet itself.
For a shared style sheet, the option is StyleDefinitions ->"filename", where filename is the name of the shared style sheet. If the style sheet is not on the style sheet path, the file name relative to the notebook is used. (If the style sheet and notebook are in the same directory, only the file name of the style sheet is used.) If the notebook or style sheet is moved to a different location on your disk, the front end may be unable to find the style sheet when the notebook is opened.
When choosing a shared style sheet, you should make sure the notebook is first saved to disk (i.e., not left as an untitled notebook). If the notebook is not saved first, the style sheet name is recorded as an absolute path name since the ultimate location of the notebook is not known.
The style sheet contains a set of style definition cells. (For a full description, see How Settings for a Style Are Determined.) The main style definition cell is the cell labeled "Prototype for style style". The underlying Mathematica expression for the same cell is Cell[StyleData["style"], options]. (To see the underlying cell expression, select the cell and choose Format Show Expression.) The options specify the attributes of the cell with the style name "style". For any cell in the notebook of that same style, the specified options will be applied to the cell. If an option has been set in the style sheet and in the cell itself, the cell's options override the style sheet options.