Referencing is a standardised system of recording the breadth of your reading and the sources you have used in an assignment.
Why is it important?
All academic work is an on-going conversation. You are now joining that conversation, and you will need to distinguish what you say from what other people have said about a subject. Good referencing shows your reader what has influenced and informed your ideas, and how you have built upon other people's work.
How do I do it?
Keep track of what you have read, and where information has come from so you can refer to it later. Referencing is for the benefit of your reader; they need to be able to find the information themselves so you will need to be organised and methodical.