A file reference is an object that allows programs to refer to files on a file system, and operate on them. Browser-based applications (e.g. JavaScript and ActionScript) need them to save and upload files to / from the user's file system because all file system interaction is policed by the browser itself.
A file reference is an object available in most programming languages' libraries.
In ActionScript, file upload and download must be done through the FileReference class, and the Flash Player has to channel those requests to the hosting browser.