Lookup column is field that takes value from the another list and display as a Choice column or Multi select List-Box depending upon the selection.
Below are the advantages of Look column over a Choice dropdown column:
- The Look up column allows non-admin users to add new choices in dropdown by adding new values in source list
- You can manage permission at source list per list item. Depending on permission lookup column will show/hide specific items to user based on permission
- Look up field can be used to make relationship between two lists
- We can create count related lookup column in source list, which is computed field that computes the number of items in the target list that point to the current item of source list. Here is article on the same.