Reference drivers are produced by the company who makes the chipset on your graphics card and will work on all the cards that use that chipset (e.g. RivaTNT reference drivers should work on all TNT based cards).
The actual manufacturer (e.g. Diamond, STB, etc) can then take the reference drivers, and add their own extra features - for example if your card has a special feature, say TV-Out, then these extra features will need to be added to the manufacturers own drivers.
It depends which graphics card you have as to whether or not the reference drivers will work better than the manufacturers own - certainly with Riva128 based cards, such as the Diamond V330, the reference drivers always worked better than the manufacturers own. On the other hand, with the new RivaTNT cards, the manufacturers own drivers seem to be better - swings and roundabouts!
Also, what is the difference between the video card drivers (eg reference drivers) and the APIs? I know that DirectX 6 and supposedly OpenGL support 3DNow, what is the job of APIs as opposed to the video drivers?
There is no mention of 3DNow! at all on nVidia's site, nor in their release notes for any reference driver releases. I'm assuming, then, that the answer is no.
Drivers are software that tell an Operating System (such as Windows) how to interface with a piece of hardware, such as a video card. They're also how the piece of hardware communicates with the OS. Any information passing from OS to hardware and back is done through device drivers, which translate the info.
An API is the means by which a program (such as a game or media player) communicates with the OS. Video cards are manufactured with specific types of APIs in mind, and their drivers enable them to handle instructions of that type very well. For example, Quake2 running in 3dfx Glide mode on a system with a Glide supporing card (e.g., a Voodoo card) would run very well because the card is optimized to handle instructions the way Quake2 is giving them (Glide interface).
I've seen on at least 2 pages that the latest reference drivers DO support 3DNow, but there's no word about it on AMD's website or NVidia's website. I emailed one of the nvidia guys and asked him, will wait for a reply. If he doesn't know then I'm buying another graphics card!!
I had a close look at AMD's website and then the readme files for nvidia's reference drivers. The AMD site only says that the Riva 128 and 128ZX support 3DNow, no word about the TNT. I looked at the readme files at nvidia and the 128/128ZX ones both mention 3dnow support, but neither of the two driver sets for the TNT mention it. I assume that nvidia is still working on it.
In a way this is good news... Tom's hardware guide claimed to be using the TNT with 3dnow enabled but the figures were identical to a non-3dnow setup. Because the 3dnow drivers aren't even out yet, K6-2 + TNT users can be satisfied that the best is yet to come. The main question is why nvidia is taking so long with 3dnow for the TNT? They are probably trying to do as good a job as possible in order to out-compete the V2 with 3dnow. In my opinion, that's a good thing so long as they give us the goodies soon! (or even a beta set so we can get good performance, then when they release the finals we can get the best)