I have a simple question. is Vref always 1.25V or is Vref the voltage that drops on the regulator(i.e. something that changes with the values of the resistors, input and output voltages etc.)
The Vref is the reference voltage and it doesn't change, there is a slight drift with temperature (fig8 page 5 of the datasheet) but it is in the mV range.
You also have to maintain a minimum output current and a min input voltage for the Vref to be stable.
The error amplifier changes the output to maintain a stable Vref, depending on the resistors ratio you get the output voltage Vref(1+R2/R1).