reference inputs show connecting wires as dashed lines

and what does the "is reference" check box in the type properties page under inputs/outputs mean? I want to set
reference inputs show connecting wires as dashed lines

- In my experience that option provides purely visual guide with no effect on the functionality of the node

Many nodes use it roughly as a way to help distinguish between nodes whose geo directly contributes to the output and nodes that are used as a reference broadly speaking

But of course its up to you to decide the meaning within your tools and whether you establish some sort of convention, in that sense I feel its similar to coloring the inputs

- I dont think its possible to dynamically change it per HDA instance, the only nodes that I've seen it changing dynamically were HDK nodes like Switch, ...