In Smarty 3.1 template inheritance is a compile time process. All the extending of {block} tags 

is done at compile time and the parent and child templates are compiled in a single compiled template.

{include} subtemplate could also {block} tags. Such subtemplate could not compiled by it's own because

it could be used in other context where the {block} extended with a different result. For that reasion

the compiled code of {include} subtemplates gets also merged in compiled inheritance template.

Merging the code into a single compile template has some drawbacks.

1. You could not use variable file names in {include} Smarty would use the {include} of compilation time.

2. You could not use individual compile_id in {include}

3. Seperate caching of subtemplate was not possible

4. Any change of the template directory structure between calls was not necessarily seen.

Starting with 3.1.15 some of the above conditions got checked and resulted in an exception. It turned out

that a couple of users did use some of above and now got exceptions.

To resolve this starting with 3.1.16 there is a new configuration parameter $inheritance_merge_compiled_includes.

For most backward compatibility its default setting is true.

With this setting all {include} subtemplate will be merge into the compiled inheritance template, but the above cases

could be rejected by exception.

If $smarty->inheritance_merge_compiled_includes = false; {include} subtemplate will not be merged. 

You must now manually merge all {include} subtemplate which do contain {block} tags. This is done by setting the "inline" option.

{include file='foo.bar' inline}

1. In case of a variable file name like {include file=$foo inline} you must use the variable in a compile_id  $smarty->compile_id = $foo;

2. If you use individual compile_id in {include file='foo.tpl' compile_id=$bar inline} it must be used in the 

   global compile_id as well  $smarty->compile_id = $bar;

3. If call templates with different template_dir configurations and a parent could same named child template from different folders

   you must make the folder name part of the compile_id.

In the upcomming major release Smarty 3.2 inheritance will no longer be a compile time process. 

All restrictions will be then removed.