Referral traffic is visits that arrive from a link on another site, as opposed to search, direct or paid traffic.
Analytics identifies referrals from the referrer header sent by the browser, so referral traffic is essentially "someone linked to you and a human followed it". It is the traffic type most correlated with reputation, because it requires a third party to have chosen to point at you.
Social platforms complicate this. Many apps open links in an in-app browser and strip or rewrite the referrer, so genuine social referrals arrive labelled as direct. This is one of the main reasons social traffic is chronically under-counted, and the main reason to use UTM parameters on links you control.
A steady, diversified referral profile also matters for search: links that send real visitors are the links search engines weigh most.
In practice
A mention in a newsletter with 8,000 readers sending 340 visits is referral traffic; the same newsletter mention without a link produces direct traffic you cannot attribute.
Common mistake
Reading a large "direct" bucket as brand strength. It is usually untracked social and email traffic, not people typing your URL.
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