Cross references are really handy tools in Word when you are writing a long and complex document. They help by automatically keeping track of where things you are referring readers to are located in the document, and they update automatically if you need to change where things are.
So, for example, you may have several figures you need to refer to, and at some point you may need to move these around to different places in your document. What was originally labelled Figure 1, may need to change to be called Figure 3 and all the other figure names may need to change accordingly. Instead of manually having to change all the figure captions as well as all the places in the document you have referred to the figures, Word can do this for you automatically as soon as you move the figure. Can you see how helpful that would be?
This link will show you how to use cross references in your document. http://www.dummies.com/software/microsoft-office/word/how-to-put-cross-references-in-a-document-in-word-2016/