What is the difference between a 'referenced' and 'managed' Catalog?

In simple terms, a 'managed' Catalog contains the original files inside the .cocatalogdb - a 'referenced' Catalog leaves your images in their 'current location' and the database will simply reference these in the Library tool.

When importing to a Catalog, you will be given the option to Import To 'Inside Catalog' (managed) or 'Current Location' (referenced) or a folder of your specifying 'Choose Folder' (which is referenced, however the image files will be copied to that location).

Under 'Folders' in the Library tool, you will be able to see which images are managed and which images are referenced. 'In Catalog' contains the images imported inside the database (managed) and the system folders describe where the images are located on your connected drive/s (referenced).