References are small components of a level - such as a single building or structure - that are edited separately from the main level.
Map references allow you to include the contents of one map in another map. This means you could construct one building and save it as a map, then re-use it as many times as you want in any other map your make. By virtue of being a reference, you can then edit your original, knowing that all the changes you make will be reflected in all the levels that reference it.
References can include brushwork, entities, patches, and almost anything that can be contained within a standard map.
The advantage of references is that a building or structure can be built to-the-grid, but when inserted into a map can be rotated as necessary. This means creating angular or rotated buildings is no harder than creating one that is grid-aligned - you simply rotate the reference rather than the actual building. You can reference a map multiple times and each time give it a different rotation.
References are one of the most useful level design features to grace ETQW, allowing the easier creation of level geometry such that it is easier and quicker to create more natural maps.