In Italy we have TWO fully "embedded" sovereign states. One is San Marino and the other is the Vatican City which is toally surrounded within Rome's city. Monaco is on French territory not in Italy. There are historical/fiscal reasons for San Marino and Monaco and a mix of temporal and religious power behind the Vatican's indipendence. read more
As a microstate being completely surrounded by another country, Italy is somewhat of a protector of San Marino. This is typical for all microstates and their neighbors. For example, Monaco and France, Andorra and France and Spain, Vatican City and Italy etc. read more
First of all, Monaco was annexed by revolutionary France and was part of it from 1793 to 1814. Before 1793 and from 1814 to 1860 it was surrounded by lands belonging to the House of Savoy. (So for those specific timeframes, it would be pretty hard for France to annex Monaco without annexing Savoy's lands). read more