Excel itself has very good help on this. Vlookup and Hlookup are essentially way to reference a value from a table. This reference can be used to manipulate the lookup value instead of copy/pasting it in multiple places, hence the single source can be referenced in other sheets easily.
It is also very useful to find out if data exists in the reference table. E.g., if you want to find out if Revised salary is updated for all employees in the Increment sheet, you can easily do it through vlookup. If the value is not found you'll see N/A in the lookup value.
Hlookup is also very useful, it does a search across columns instead of rows.
See the attached xls for an example of vlookup.
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