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Suppose you prepare a ebook in html say. Now you want to add a reference to a particular paragraph in the ebook. In order to do this you run some algorithm to find out what the number of the paragraph is (say by previewing the book in a viewer app, in reference mode). Then you add the reference. Now if a user of the book tries to follow that reference all he need do is use the same viewer app/algorithm to decode what that reference points to.
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