Firstly, there is a link field in the doctype - for example -
And then you use this field to fetch something from the doctype -
In the example above, we have a link field in employee which is a link to the DocType Employee. And we use this field to fetch a field from Employee doctype.
Basically, whenever employee is selected in the field, then department for that employee from its master will be fetched and stored in the department field in the current doc.