There is a lot of confusing misinformation in the answers here. The easiest way to understand this is to abandon the idea that "ref" means "by reference". A better way to think about it is that "ref" means "I want this formal parameter on the callee side to be an alias for a particular variable on the caller side".
When you say
void M(ref int y) { y = 123; }
...
int x = 456;
M(ref x);
that is saying "during the call to M, the formal parameter y on the callee side is another name for the variable x on the caller side". Assigning 123 to y is exactly the same as assigning 123 to x because they are the same variable, a variable with two names.
That's all. Don't think about reference types or value types or whatever, don't think about passing by reference or passing by value. All "ref" means is "temporarily make a second name for this variable".
