A refugium(refuge, fuge) is a separate tank that houses a sand bed and macro algae for the purpose of raising pods and other small critters by providing a predator free environment for them to thrive. These critter's numerous offspring are then used to feed a large variety of animals in the display tank.
A dual purpose for the fuge is to provide a means for nutrient export. The macro algae(plants) take in excess nutrients as food and then grow. The "aquarist" then removes(harvests) a large portion of the macro algae therefore removing unwanted nitrates from the environment.
Not all fuges are built the same or contain the same features. Some don't have any sand, but most will have macros. The pods(bugs, crustaceans, etc) are a mainstay for some fish and you can also raise feeder fish, shrimp in there also.