What this module do and how to use it ?

Well, when you cck installed (http://drupal.org/project/cck), it lets you define a widget on any node type and you can link either comments from the same node or from other nodes. I created this once for a project because a client wanted a 'quote of the week' which displayed the subject of a comment entered by an online user. They had one node which was alwas displayed on the home page and every now and then they edited it and chose another comment to be linked to it. In the theming layer, they only did the output of this node.

That's strange, normally in the 'field type' select box, you should be able to choose 'Comment reference'

Well, first of all, there must be at least one exisiting comment of course.
If you chose for the select list, you can choose from that select field, with autocomplete, you can start typing and it will present you with a list of comments depending on the word you entered

Hmm this module doesn't provide that functionality. Haven't heard of any other module out there yet that makes this possible.

Possibly yes, but again, this module is referencing, not for creating comments.