A reference level expresses height relative to an agreed datum. It allows different building components to be set out consistently. Without a clearly identified reference, separate measurements may describe different intended heights despite appearing precise.
How this term relates to your project
In an extension, finished floor, structural slab, threshold and terrace are distinct levels. Make explicit which one a drawing identifies. Floor layers and any heating system need to fit within the available depth. Establish where the reference remains visible during construction and who checks important measurements.
Existing floors can be uneven, so taking dimensions from arbitrary locations causes confusion. Review levels when finishes change. Retain final height agreements with the drawings so the kitchen supplier, frame installer and flooring contractor do not each work from a different assumption about the same finished surface or doorway connection.