I came across this example in my Easy French Step by Step by Mcgraw Hill but I cannot fathom out why there is a "d'un". What does it refer to? Can this translate to english? Are there any specific rules around this usage?
I wouldn't see in that more than an idiomatic construction. In French the choice has been made to repeat the préposition or to include it in a partial ellipsis whereas in English the ellipsis is complete most of the time; this usage is found in other constructions.
What I need is a glass of cold water.
Ce dont j'ai besoin, c'est d'un verre d'eau froide.
You wouldn't say in English "What I need, it is a glass of cold water."; that is not idiomatic English; however the addition of "it" (c') is idiomatic French; the principle is the same for de (or d'), merely idiomatic usage, which involves, truly speaking, not much of a principle.
What's reinforced concrete made with? Concrete and steel. With concrete and steel.
Avec quoi est fait le béton armé? Avec du béton et du fer.
What are you in need of? Water! (I am in need of water!)
De quoi avez-vous besoin? D' eau! (J'ai besoin d'eau!)
What have they been talking about? All sorts of things, but not that.
De quoi ont-ils parlé? De choses diverses mais pas de ça.
What battle did they talk about? It's the battle of Waterloo. About the battle of Waterloo.
De quelle bataille ont-ils parlé? C'est de la bataille de Waterloo. De la bataille de Waterloo.