The data to be submitted is selected by evaluating the expression in the ref attribute. If no attribute is present, then its value is "/", which in effect means the first instance in the containing model. If a value for @ref is present, it represents the root of a fragment which will be used to find the data to be submitted. This obviously means that it is not necessary to submit an entire instance--smaller parts can be sent.
Sometimes an author will not want to serialise any data for submission, and for this reason XForms 1.1 adds the serialize attribute which can be set to false to indicate no data should be sent. But assuming this attribute is set to true, or is not set at all, then starting at the root of the fragment, all relevant nodes--i.e., all nodes that have their relevant Model Item Property evaluating to true--are collected to make up the data to be sent.
A common pattern is for authors to use relevance only to control the way that the user interface appears to their users (since non-relevant controls are hidden), but to still want all of the data in the instance to be submitted. To make this possible, XForms 1.1 introduced the relevant attribute, which can be set to false to indicate that even non-relevant nodes should be serialised for submission.
Note that the value in @ref also sets the evaluation context for any XPath expressions that might occur within the submission element.