Taxonomy term related content When click on any term, content related to that term should be displayed on the right hand side of a page. I have my taxonomy tree on left sidebar using Drupal API function.

What I had done is:


Created view with content type, containing all products related to
taxonomy terms.
Add a field in that content type with field type "term reference"
and widget type "simple hierarchical select" module.


Now what should I do in order to filter the term based content? Any Ideas?
If I understand your question correctly, sounds like you maybe want to use a contextual filter for the taxonomy term TID, and embed as a block in the sidebar for taxonomy pages. 

This may help: http://dannyenglander.com/blog/using-views-contextual-filters-create-related-content-block-drupal-7

Steps to help:


create a relationship, Content: Taxonomy terms on node, choose taxonomy, check require this relationship
add contextual filter, Taxonomy Term: Term ID, select the relationship you just made, check "provide default value- Taxonomy term ID from URL, Load default filter from term page.


Just checked on a vanilla install, and that worked a charm for me...