Building an instrumentation amplifier
The "vref" input of a instrumentation amplifier is just a DC offset on the output.  Its use here doesn't convert AC (oscillating) to DC (steady) voltage, but just adds a DC offset to the waveform so that it is oscillating between (say) +3V and +1 V, rather than between +/- 1V.

You can see how it works in the datasheet of the INA118: http://www.ti.com/lit/ds/symlink/ina118.pdf, which shows the standard 3-opamp schematic, including the vref input.  I googled the reference you mentioned: http://www.egr.msu.edu/classes/ece480/capstone/spring15/group05/uploads/4/7/5/1/47515639/ece_480_app_note_justin_bauer.pdf here, it is just shown using ground as the reference voltage, but that is easily changed: disconnect R2 from ground, and connect it to your desired reference voltage.