Customer Referrals can be a good way in which to drive sales on your site, as you can get your customers doing the work for you, giving a small benefit to the customer who is referring people to your site. Within the admin CP, you can get to the referal setup section by going to Commerce>Customers>Referrals.
Once you enable referrals and save them as being on, you will see 3 tabs. The first section you will see will look similar to the screen below, and allow you to switch the system on and off, and to set whether your customers can see the commision rules. In most cases you would leave this on, however if you set up complicated rules, you may wish to switch this off. Switching this off will give you an editor where you can add information to show about the commission received instead.
The next tab will show you a list of the commission rules currently set up, and give you the ability to add new ones. Clicking on "Create New" will give you a screen similar to the below.
From this screen you can set up a commission rule set, along with the percentage of that sale you would pay the referrer.
You may want your customers to use referral banners if they are advertising your site or products. You can add in as many banner as you wish within the Referral Banners tab, which will then be shown to your customers for use when referring people to your site, along with the links for these in html and bbcode.
By default the referrals section on the front end of your site is under Store>My Details>Referrals (of course you can change this using the menu manager). Here they will see their unique links to give to people when referring others to your site. Anyone using these links will be shown as referred by the person who's link they used.