Polystyrene Insulation

Apologies in advance if this is a dumb question....I am still feeling my around in my new 30 year old house and finding things that seem strange to me!
Latest is the way the exterior walls have been constructed. The profile (from the inside out) is as follows:
-drywall-vapor barrier-2x4's (+fibreglass insulation)-polystyrene panel (about 1 inch thick)-sheathing (inch thick compressed paper stuff)-tar paper-cedar siding
It's the polystyrene that's got me confused - it appears to be attached to the exterior face of the 2x4's. At first I thought it was just sat in between the 2x4's, but having just refinished the exterior garage walls, it's apparent that they cover the outside face of the 2x4's.
Is this normal? I would have expected that this type of installation would lead to loose sheathing/siding, but there's no apparent problem.
Thanks in advance
Mat
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ITS BETTER INSULATION SINCE IT COVERS THE STUDS AND IS VERY COMMON
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