Reference

To refer means 'to send for information', 'to seek information'.
This is exactly the principle at work in reference within texts, whereby readers can make sense of given word or phrase by looking elsewhere in the text to obtain a fuller picture.
Reference is a semantic relationship and signals the relation between a discourse item and a preceding or following item.
The discourse items are:
a) personal pronouns, I - you - she - he - they - me - us
b) demonstratives, this - that - here - there - now - then
c) the definite article THE
d) comparatives.

Reference can be of two different types: exophoric or situational (referring to an item as identified in the extralinguistic situation accompanying the text) and endophoric or textual (referring to an item as identified in the surrounding text).
Ex: "Please don't do THAT while I'm trying to work" --> here, THAT refers to an element contained in the extralinguistic situation or content, whose nature is not made explicit within the text. This type of reference is said to be EXOPHORIC.
      "True to his nature, James started whistling to himself as soon as she settled down to work. 'Please don't do THAT while I'm trying to work' she begged. --> here, THAT refers to an element which is clearly retrievable from the surrounding text (also known as context). This type of reference is said to be ENDOPHORIC. It is this type of reference which creates cohesion in the text.
When ENDOPHORIC, reference may be ANAPHORIC (referring to the preceding text --> several people approached. They seemed angry) or CATAPHORIC (referring to the following text --> Listen to this: John is getting married).

a) Personal pronouns reference
Personal pronouns substitute for nouns. These pronouns are of personal nature: they will be referring to people; however, 'it, they-them' may also refer to non-human entities and inanimate objects.
John said that HE was not going to school (anaphoric)
I couldn't believe IT! The house was a complete wreck (cataphoric).

Lack of cohesion is at the basis of much ambiguity in a text.
Sometimes the disruption of pronouns cohesion is deliberately sought by writers in order to achieve certain effects, for example to create a mysterious atmosphere.

b) Demonstratives reference (deictis)
Items such as this, that, those, there, here, then, now etc. are known as deictis, which function as a kind of "verbal pointer", demonstrating where something is. Demonstrative reference can be anaphoric or cataphoric.

c) The definite article THE
Reference can also be achieved by the use of a definite article or adverb:
"A man crossed the street. Nobody saw what happened. Suddenly, THE man was lying there and calling for help."
"I was born in war time. When THE war ended...."

d) Comparative reference
Comparative reference implies not only that we should look elsewhere for information, but that we should look for it in order to compare the items that are being linked. Usually the reference point for the comparison being made is given in the text:  Mary is TALLER THAN Jennie.
However, the reference point can also be omitted, by leaving out the element that the mentioned item is being compared with. This cohesive device is often found in advertising, where comparative reference is incomplete: THE MILDER TOBACCO, KINDER TO THE ENVIRONMENT.