These reference options specified to the package at loading time. They are intended to modify the default loading parameters for the package.
Typical usage would be via
\usepackage[<options>]{<package>}
Other methods may be specific to the package. For example, hyperref supplies the macro \hypersetup{<options>} to specify package options after loading the package itself. geometry does something similar through \geometry{<options>}.
Options may also be passed to a package; typically used when writing a package that relies on other packages. The macro \PassOptionsToPackage is used for this.
