WCF is not a "remote object call" method or anything - it's pure message-passing. So havnig a "by-ref" parameter might compile, but it's really not going to do anything useful.
On your client, you have a method with parameters which you call. The WCF runtime then intercepts that call, packages up the parameters and any further information needed into a message, serializes that message (into textual or binary XML), and send that message across the wire to the server.
The server then deserializes the messages back into a set of parameters, and the dispatcher component on the server will then instantiate the service class and call the appropriate method on that service class instance with the parameters from the message.
The whole story works backwards for the reply the server sends back.
But again: all you're exchanging between client and server is a serialized message - there's absolutely no point in making a parameter "by ref" - it cannot possibly be a by-ref parameter, in the end. The serve and the client are totally separate worlds, totally separate objects and classes - they just look the same on the wire.
So I think whoever wrote that WCF method didn't understand the principles of WCF message passing, but was lured by the way WCF feels - like just a method call. But it's really not just a method call in the end.