IDIBRONCO, you are pretty close. Liner typically refers to the cylinder liner that is used on "wet" liner engines. They have O-ring grooves and seal against the block using O-rings and brass shims. Liner height or protrusion is critical, as the clamp load from the cylinder head holds the liner in place. During an overhaul, these liners are removed and replaced, the engine is never bored to a larger piston size. Often the sealing surfaces of the block will still need to be re-machined to clean it up. There are over sized shims available just for this reason. See Image of a wet liner below. Most large displacement diesels are wet liner engines. The smallest wet liner engines that I am aware of is International's 400 engine family, (DT466 and it's variants) and the 53 Series Detroits.
A dry liner, or sleeve, is used on all parent bore blocks to repair a cylinder that has been damaged beyond what can be removed by a standard overbore. In this situation, the bore is machined out far enough to accept the sleeve. The sleeve is than pressed into the bore and then machined to final bore size and surface finish. Nearly all light duty engines (including our IDI's) are parent bore blocks.
That said, alot of machinists will interchange the use of liner and sleeve, so don't get hung up on the nomenclature. Typically most machine shops will charge $80 to $125 per hole to sleeve a block.
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