I expect some of you remember L.M. Montgomery's books The Story Girl and The Golden Road. These were episodic novels about brothers Bev and Felix, their cousins Felicity and Cecily King and Sara Stanley and companions Sara Ray and Peter. The story girl of the title was Sarah Stanley, who was, as her name implies, a storyteller, and many of the chapters include the stories she told in the old orchard. Similar stories-within-a-framework-novel occur in books by Elizabeth Enright and Eleanor Farjeon, but a lot of other authors have also used the story within motif, although with less intensity.
I realised today when I was writing a chapter of my latest w.i.p. that fully half of it is a story told by a character named Justin Bakewell. The chapter is set in late 1962, but the story Justin tells is from the early 1940s when he was in the army and unhappily separated from his wife. He's telling the story to an audience of three; his wife Betula, their son Joe and Joe's fiancee Liz. Joe and Betula have heard it before, and in fact Betula lived it. It's new to Liz, but in the telling Justin adds a detail Betula hadn't known.
This book is a retrospective with its 1960s setting. Joe and Liz have appeared in other books, set in the 1980s and 2000s, and in one of them, Joe tells his son Si a story that proves he's every inch Justin's son.
A lot of this has just happened as I was writing so, like Betula, I learn new details about my characters every day.