A recent article by Les Rosen explains it well, while also endorsing Harver Reference (formerly known as Checkster), our automated automated reference checking solution.
They are several ways to look at it. One way, as mentioned in the article above: “Internet based references can be utilized by an employer to whittle down the field of candidates and to help an employer decide whom to hire. Background checks occur after an employer has made a tentative decision, and needs to determine whether there is any reason NOT to hire an applicant.“