Refraction is how much a ray of light will bend when it passes through an object. This bending generally occurs at the interface between 2 types of media. Light behaves in much the same way as it moves from air, where it travels very fast, into another medium like glass or plastic or water, where it travel more slowly, hence bending the path of travel.

The angle of refraction depends on the angle of incidence and the difference between the two mediums. When the incident ray is perpendicular to the surface, no refraction occurs and the ray passes straight through the second medium.

Refraction is what gives rise to the shimmering bands of light often seen in the bottom of shallow pools of water. Or a magnifying glass its magnifying properties.

In RS3D, we call the Refraction Index, Optical Thickness. When defining the Refraction index of the default glass for example, we use the following formulae:

optical density = 1 - 1/IOR

For example:
glass = 1 - 1/1.5 = 1/3 = 0.3333
diamond = 1 - 1/2.4 0 = 0.59
(Use this 0.59 number in the refraction field in simple mode)

Refraction will only work if your material is partially or completely transparent.
(ie the Transparency channel has a value higher than solid black)

If the Refractive Index is set to 1.0, then light does not bend when it passes through the object.

Here are some other useful values for Refractive Index: