That term has more than one definition and more than one way to implement it.
This thread may help: Auto Fill
If you have any follow up questions, feel free to use Post A Answer to post them here rather than in the above thread.
from filemaker pro 11 the missing manual...
Lookup fields use relationships to do a one-time “copy and paste” of data from one table to another. Once the looked-up data is in its new table, you can edit it, if necessary, but it doesn’t change automatically if the related data changes.
example of use. you have a contact database with name, address, city state, zip.
after the user enters an address and hits [tab] user is taken to zip code field, user enters zip code and a lookup is performed and the city and state corresponding to that zip code is automatically entered, so the user does not have to enter city and state when performing data entry. unless of course the "looked up" city or state is wrong.
hope this helps