To understand this you’ll first need to understand pointers and references. I’ll simply explain the type declaration syntax you’re asking about assuming you already know what pointers and references are.
In C, it is said that ‘declaration follows use.’ That means the syntax for declaring a variable mimics using the variable: generally in a declaration you’ll have a base type like int or float followed something that looks like an expression. For example in int *y the base type is int and the expression look-alike is *y. Thereafter that expression evaluates to a value with the given base type.
So int *y means that later an expression *y is an int. That implies that y must be a pointer to an int. The same holds true for function parameters, and in fact for whole function declarations:
int *foo(int **bar);
In the above int **bar says **bar is an int, implying *bar is a pointer to an int, and bar is a pointer to a pointer to an int. It also declares that *foo(arg) will be an int (given arg of the appropriate type), implying that foo(arg) results in a pointer to an int.¹ So the whole function declaration reads “foo is a function taking a pointer to a pointer to an int, and returning a pointer to an int.”
C++ adds the concept of references, and messes C style declarations up a little bit in the process. Because taking the address of a variable using the address-of operator & must result in a pointer, C doesn’t have any use for & in declarations; int &x would mean &x is an int, implying that x is some type where taking the address of that type results in an int.² So because this syntax is unused, C++ appropriates it for a completely different purpose.
In C++ int &x means that x is a reference to an int. Using the variable does not involve any operator to ‘dereference’ the reference, so it doesn’t matter that the reference declarator symbol clashes with the address-of operator. The same symbol means completely different things in the two contexts, and there is never a need to use one meaning in the context where the other is allowed.
So char &foo(int &a) declares a function taking a reference to an int and returning a reference to a char. func(&x) is an expression taking the address of x and passing it to func.
1. In fact in the original C syntax for declaring functions ‘declarations follow use’ was even more strictly followed. For example you’d declare a function as int foo(a,b) and the types of parameters were declared elsewhere, so that the declaration would look exactly like a use, without the extra typenames.
2. Of course int *&x; could make sense in that *&x could be an int, but C doesn’t actually do that.