“what’s the practical usage of RF signal strength for wireless mic system?”
The “RF signal strength” is probably an indicator of how strong the signal is where the receiver is. It is used to show the effect of distance, obstacles, etc. on the reception from the transmitter.
“What level/setting should I use?”
It is typically not something that you adjust. It is a number that you can read.
“I understand that AF-RF are Audio Frequency-Radio Frequency, but how are they related to each other?”
AF is the sound that you can hear with your ears. RF is the radio signal that carries the audio (or video or whatever) through the air. Wireless and cell phones, computers, television and many other things use various parts of the RF spectrum. Note that wireless microphones were banned from the 700MHz band last year and are no longer legal to use in the US.
“it’s saying that AF indication appears whenever the output audio signal is stronger than the reference level. What does this refer to?”
“Reference level” may refer to the input level of the transmitter (guitar vs. microphone, etc.) or maybe to the output level of the receiver (mic vs. line level, etc.) It is hard to say without seeing the rest of the information.