What is difference in the referencing entity options while adding a relationship in a views?
Lets say that Content A references Content B via an entity reference.

Content B is the Referenced Entity, while Content A is the Referencing Entity.  

It really depends on what you are trying to see.  Say for example you pull a view of all content type B but want data from content A.  In that case you would use Entity Reference: Referencing entity.  If you have Content A and want data about Content B you would then use Entity Reference: Referenced Entity.