This is used to append() values to the templates by reference. If you append a variable by reference then change its value, the appended value sees the change as well. For objects, append_by_ref() also avoids an in-memory copy of the appended object. See the PHP manual on variable referencing for an in-depth explanation. If you pass the optional third parameter of TRUE, the value will be merged with the current array instead of appended.
Technical Note: The merge parameter respects array keys, so if you merge two numerically indexed arrays, they may overwrite each other or result in non-sequential keys. This is unlike the PHP array_merge() function which wipes out numerical keys and renumbers them.
See also append(), assign() and get_template_vars().