Relative and Absolute references behave differently when copied into other cells.
Relative references change (relatively) when a formula is copied to another cell. In other words, they change based on the formula. So, if you copy a formula referencing Cell A1 and copy the formula to Row 2, the "A1" reference will change to "A2" since you copied the formula down a row.
Absolute references, on the other hand, remain constant no matter where they are copied. In other words, they will NOT change when you copy a formula to other rows or columns. This type of cell reference is useful when budgeting, for example. You can see what happens if revenues increase by a specific percentage. When formulas are based on the percentage cell, you can change the percentage using a single cell and all other formulas referencing this cell will update automatically according to the new number in that cell.
Watch this brief tutorial to see exactly what I mean.