ElementRef capsule wraps (and references) an external element (object) to prepare it to participate in a hierarchy of similar elements. In other words, the ElementRef capsule provides an API around the wrapped element; an API that serves the purpose of managing hierarchical structures of elements.
ElementRef capsule wraps a single element and creates one hook and one loop, i.e. the hook and the loop that directly represent the wrapped element. The hook represents it as a parent while the loop represents it as a child in its future parent-child relationships.
Connecting hooks and loops only make sense once the element handlers functions are set using the setDefaultElementHandlers function.