Three typical approaches that have been used for CAD-GIS integration.

These three approaches of CAD-GIS integration I gleaned from www.esri.com.

File translation:
The conversion of data from one file format to another. This could be using an intermediate file such as ArcInfo Workstation in it's DWG-DXF-Coverage translator.
Direct read:
The data is read and converted on the fly into memory without an intermediate format.
Sharing access to a database:
Access to data on the fly is done by embedding an application program interface (API) on one system.