inset = Inset[
   Plot[u^2, {u, 0.05, 0.25}, Frame -> True,
    FrameTicks -> {{None, All}, {None, All}} , ImageSize -> 150],
   Scaled[{0.5, 0.7}]];
Show[Plot[x^2, {x, -1, 1}, Frame -> True, Axes -> False,
  Epilog -> {inset}],
 Graphics[{FaceForm[], EdgeForm[Black],
   Rectangle[{0.05, 0}, {0.25, 0.06}], Dashed, GrayLevel[0.5],
   Line[{{0.05, 0.06}, {-0.42, 0.5}}],
   Line[{{0.25, 0.06}, {0.3, 0.49}}]}]]