Referendum is a direct election system where the entire electorate is asked to vote on a specific issue generally having two alternative option to choose. Alternatives simply tell either to Accept/say Yes or to Reject/say No to the proposal.
Generally, a referendum is called to decide over an issue of massive public interest, when the situation requires a direct decision from common people and the popular one wins.
Issues or questions asked in a referendum could be a sensitive political agenda such as declaring independence of a community or geographical area, adopting a new constitution, amendment of the constitution, repeal a law etc. or could be a daily life issue such as how long should shopping malls or public gathering centers be open.
Referendum could be mandatory or advisory in nature. In case of mandatory referendum, government or regulatory body must follow the result. For advisory referendum, result helps the government or regulatory body to make the final decision.
In United States, the constitution does not allow referendum in national level. State level and local referendum are allowed in some states.