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1) In this configuration (assuming simple model for transistor) Vgs of M2 is equal to Vds of M2. Follow the biasing path, the source of M3 sees Vgs of M1, and drain of M3 sees Vgs of M1 + Vgs of M3. If M3 and M4 are matched meaning they have the same overdrive, the source of M4 will be Vgs of M1, which is equal to Vds of M2. But you are right it's not a nice way of annotating it.
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