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An allusion is a literary device that provides greater context to the work at hand by referencing a previous work of art, a person, a place, an event, or a situation—usually of some social, political, or historical significance.
For example: You're acting like such a Scrooge! Alluding to Dickens's A Christmas Carol, this line means that the person is being miserly and selfish, just like the character Scrooge from the story.
Allusions are an important part of understanding literature because they give us a deeper understanding of an author's message. An author can skillfully draw upon allusions to give a story, poem, play, or other literary form more meaning or to provide clues about an author's message.