Hi Karthik Ayyalasomayajula ,

A reference selector is used to display and, optionally, allow the end-user to select the value of a one-to-one or one-to-many association by selecting the associated object.

A reference selector must be placed in a data widget. The object(s) retrieved by this data widget must be at the many end of a one-to-many association, or at either end of a one-to-one association.

For example, if you have an employee they will work for one company. A company can have many employees. The entities Employee and Company have a one-to-many association, Employee_Company, which you can select by choosing a Company from the Employee through the reference selector.

A drop-down is used to display and, optionally, allow the end-user to edit the value of an attribute of data type enumeration.

A drop-down must be placed in a data widget and displays an attribute of the object(s) retrieved by that widget. The name of the attribute to be displayed is shown inside the drop-down, between square brackets, and colored blue.

The documentation explains it pretty clearly.

A drop-down is used to display and, optionally, allow the end-user to edit the value of an attribute of data type enumeration.

https://docs.mendix.com/refguide/drop-down/

A reference selector is used to display and, optionally, allow the end-user to select the value of a one-to-one or one-to-many association by selecting the associated object.
https://docs.mendix.com/refguide/reference-selector/