When a game has run for a long time it develops its own sort of canon. By that I mean the "official timeline" that fans would use when debating points about what is going on. In the case of a long running game though, the Canon would be what actually happened in your game as opposed to the fanciful retelling that people use when telling stories. Not that players naturally want to lie or exaggerate when telling stories, but as human beings that tendency lives within us and so deeds tend to grow in scope and scale until, at some point, the Death Lord that the party barely took down comes across like some epic 1v1 with the party Paladin with holy smitings raining down from the heavens.
Whether you have a long running game, or are using an established world, making links to the Canon of the world helps to give depth to the story. It does this because by linking things to other stories, giving an interconnected feel to the world that just makes it feel more real. Is that really just a +2 longsword that was found in the Dragon's horde, or is that the +2 Longsword that belonged to Olaf Sterngard, former PC who died a year ago fighting an Orc chieftain?
Eitherway it is a +2 sword, but by making the link not only do you give a nod to the player of Olaf, but you also give depth to the world. How did that +2 Longsword go from Orc Chieftain to Dragon horde? Did the Orc bring it? Did he die to another hero who then died to the dragon? There is a lot of possibilities, and you don't have to answer them because you've already done the important part: an object has moved without assistance of the PCs, ergo things are in motion where the PCs can't see.
Now links don't have to be this cut and dry. There are other ways to handle things. Say a PC retired and opened a tavern and the group, in the same world, is starting up a new group. Maybe that PC run tavern is this new group's watering hole. Think how much more respect the players might have when the bar keep gets upset about them being mouthy when they know that said bar keep is Sarah's old Level 15 Ranger that used to drop 3-5 enemies a round.
Or you can link to canon of an established world to borrow or steal moments. The PCs in your Star Wars game close a deal with Jabba (paying their debt and getting the hell out of dodge) the day that a bounty hunter brings some chained wookie in and holds the place ransom with a thermal detonator. This adds depth to the world, but in a different way. Every one of your players - at least those who have seen Return of the Jedi - are going to know exactly who that bounty hunter is, exactly who that wookie is, and exactly what is going to happen in the next few days. They also see how they are running in a world where this other stuff is happening.
In all cases making links can help to add depth and complexity to your game world. However, you want to make these links have a light touch. It is one thing for a PC to see Leia bringing Chewie in on their way out of Jabba's palace. It is another thing for the canon being referenced to take over the game completely. Unless, of course, that is what you and your group wants. Then have fun.