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A good letter of reference should outline the persons skills, qualifications and abilities, and should vouch for his/her character and integrity. It should not be overly long and whenever possible, it should be targeted for the type of position that the applicant is seeking.
It is hard to imagine any employer that would hire a job candidate whose resume did not include at least a couple of references. The importance of a letter of reference cannot be overstated. It gives the interviewer a positive first impression of the interviewee, and demonstrates that the person is or was a valued employee in their last position.