The formula above evaluates something like this:
=SUM(INDIRECT("'"&B6&"'!"&C6)) =SUM(INDIRECT("'"&"Sheet1"&"'!"&"data")) =SUM('Sheet1'!data)
Once the string is assembled using values in B6 and C6, INDIRECT evaluates and transforms the string into a proper reference.
Note you can refer to a named range in a formula without using INDIRECT. For example, the formula in D6 could be written:
However, if you want to assemble the reference as text, and have Excel treat the text as a reference, you need to use INDIRECT.
Note: The single quotes are added in the formula above so that the formula will work when a sheet name contains spaces.