Resolve assemblies at design time
When you add a reference to an assembly through the .NET tab of the Add Reference dialog, the reference points to an intermediate reference assembly; that is, an assembly that contains all the type and signature information, but that doesn't necessarily contain any code. The .NET tab lists reference assemblies that correspond to runtime assemblies in the .NET Framework. In addition, it lists reference assemblies that correspond to runtime assemblies in the registered AssemblyFoldersEx folders that are used by third parties.
Multi-targeting
Visual Studio lets you target versions of the .NET Framework that run on multiple versions of the .NET Framework. When a new .NET Framework version is released, the Framework can be installed by using a targeting pack, and it will automatically show up as a target in Visual Studio.
How type resolution works
At run time, the CLR resolves the types in the assembly by looking in the GAC, the bin directory, and in any probing paths. This is handled by the fusion loader. But, how does the fusion loader know what it is looking for? It depends on a resolution made at design time, when the application is built.
During the build, the compiler resolves application types by using reference assemblies. In .NET Framework versions 2.0, 3.0, 3.5, 4, 4.5, and 4.5.1, the reference assemblies install when the .NET Framework installs.
The reference assemblies are supplied by the targeting pack that ships with the corresponding version of the .NET Framework SDK. The Framework itself provides only the runtime assemblies. In order to build applications, you need to install both the .NET Framework and the corresponding .NET Framework SDK.
When you target a specific .NET Framework, the build system resolves all types by using the reference assemblies in the targeting pack. At run time, the fusion loader resolves these same types to the runtime assemblies, which are typically located in the GAC.
If reference assemblies are not available, then the build system resolves assembly types by using the runtime assemblies. Because runtime assemblies in the GAC aren't distinguished by minor version numbers, it's possible that resolution will be made to the wrong assembly. This could happen, for example, if a new method introduced in the .NET Framework version 3.5 is referenced while targeting version 3.0. The build will succeed, and the application will run on the build machine, but will fail when deployed to a machine that does not have version 3.5 installed.
The targeting pack that now ships with the .NET Framework SDK includes a list of all of the runtime assemblies in that version of the Framework, called the redistribution (redist) list, making it impossible for the build system to resolve types against the wrong version of the assembly.