A Refference is a specific Instance of a Object in your Game. You cant just say EnemyClass->DoSomething because you can have hundrets of Enemys in your Level. You have to refer to a individual Instance. So you store it somewhere, get it from somewhere or pass it along as parameter to use somewhere else.
Once you have a refference you can communicate with it or directly change it. The refference variable itself if created inside a BP is just a placeholder and is Empty by default until you set it to point to a specific Object. If you got something like CurrentTarget you obviously want to set it what you currently Aim at so it does not have to point to the same instance all the time =)
Thats about it.