This really comes into play when  you copy a cell's formula. For instance,
assume that the cell C1 has the formula =A1+B1. If you copy C1 to C2, you
will get the formula =A2+B2. This is fully relative referencing.

However, if you use an absolute reference, you fix that part of the formula.
For example, in C1 use =A$1+B$1, copy that to C2 and you get the same
formula, namely =A$1+B$1. So the row has been fixed, and when you copy the
formula, it does change as the target row changes.

Similarly you can fix the column absolutely, although in this instance it is
not relevant. It would be if you also changed the target column (from C2 to
say G2).

One final point. If you edit a cell's formula (F2), and in the formula bar
select a reference, you can quickly toggle through al of the combinations
using the F4 key