We use it constantly, whenever you insert an "assembly feature" you are creating an external reference. For instance, let's say you created 3 pieces of wood and stacked them in an assembly. Now you want to drill a hole thru all of them. You have just created an external reference. The individual parts now have a new feature that is defined "in-context" to the assembly. Any changes made to the feature in the assembly will propagate to the parts. You can also create parts entirely "in-context" to an assembly, this allows using existing geometry to create mating parts and also makes it very easy for updates as the design changes.