Google Referrals allow you to choose specific products or groups of products to advertise on your site, allowing you to match ads to your content. You can choose up to 15 products or specific ads to rotate in the referral unit. You can also choose categories and keywords to ensure you get newer ads as they become available.
I have been using Google AdSense referral program since 3 months and let me tell you it is very customized service delivery product from Google. It gives you a choice of selecting the advertisement and in various formats available.
There are many differences between the AdSense referral program and the normal advertising program. One of them is that you can actively promote and encourage readers to click your referral links. In the referral type of ads you won’t get paid per click but only when the reader meets the specific required action. If you do recommend the product or services you’ll increase your chances of conversion as you are helping in selling the product or services.
Follow the below steps to effectively use the referral ads :

Step 1: When generating the code for your AdSense Referrals, first select the categories / products that are most relevant to your readers (for my case, categories that convert include computer software, Internet, Online Communities, Photos and Video products.).Check the link for Adsense Referral Setup.You will see the following screen.Select Product from various category available.

Step 2: Click the option “Pick best performing ads” but one advice I would like to give is from using Image only ads in Referrals as that is very likely to impact the performance.
Google recently had changed the rules and allow publishers to use two referral links per page instead of single link that was allowed earlier. One can use one text link positioned at the bottom of individual posts and one in sidebar for AdSense.The ones that are positioned at the bottom of posts works best.
Google explains what is actually allowed and why:
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