You got it, the tracking URL can be as complex or as simple as you need.
The ref1 will be located under Acquisicion > Campaigns if I recall correctly. Basically adding a tag allows Analytics to group these visitors a bit differently, and show detailed information about how those referred customers behave (ie, bounce rate from ref1, vs bounce rate for ref2, or total visit time between sources).
After a day or two the links should begin tracking as intended. One other "gotcha" that I've learned about Google Analytics is its best to plan the names in advance.
If you plan to do an Adwords, Facebook and Magazine ad campagn this fall plan for these tracking codes now. They won't be used, but its always good to have a predetermined naming scheme for all your links. Ref1, or ref452 may be a bit hard to remember in a year or two :-)
Hope this helps,
Alex Massaad