When you have, for instance, a blue car, you can make a blue car paint shader, and add layers of mud on it. Those layers will be present in parts that are close to the ground and wheels, so you will probably make multiple shaders. One for the roof, that only has a big white '13' on it and no mud (a separate layer for the mud). One for the doors that have mud on the underside (a separate layer for the mud), and so on. When you use the reference shader option, you mix a shader in the shader tree, that points at one actual base shader, like a symbol. Why is that nice? Because when you decide you want to go General Lee with that car model, and make it Orange, all you have to do is change the base shader you are referencing in all shaders. In the example above, that has some kind of 'baked' textures (all shadows and light inflences), the color blue in the shader trees is a reference shader. This helped me to make six more of these constructions, where I just had to change the reference shaders. And everywhere the color went, I could change it by just changing the color blue. In this case that was to be flexible when the client would ask for other color combinations and I did not have time to go around and change all shaders where the color was present. So, in short: when you want a shader or parts thereof to be used in other shaders, use the reference shader.