Sometimes its just a quick name drop like in
"You'd Better You Bet" by the Who:
But I drunk myself blind to the sound of old T-Rex.
To the sound of old T-Rex, And "Who's Next."
And speaking of T-Rex, they don't name him but they quote Chuck Berry's "Little Queenie" in their hit "Get It On": "Meanwhile, I'm still thinking..."
Steely Dan's "Parker's Band" is, of course, about the immortal Bird, Charlie Parker.
Also in Steely Dan's "Everything You Did," "Turn up the Eagles, the neighbors are listening."
The Clash, "1977": "No Elvis, Beatles or Rolling Stones in 1977."
Bob Dylan's "Song for Woody," self explanatory.
The Replacements' "Alex Chilton" is all about him and mentions his band Big Star. They also did "Johnny's Gonna Die," about Johnny Thunders.
"Come On Eileen" by Dexy's Midnight Runners: "Poor old Johnny Ray..."
Nils Lofgren's "Keith Don't Go" is about Keith Richards.
X, "I Must Not Think Bad Thoughts": "But what about the Minutemen, Flesh Eaters, D.O.A., Big Boys and the Black Flag?"
Tom Tom Club, "Genius of Love" mentions Kurtis Blow and of course James Brown.
"Yer Blues" by the Beatles: "Just like Dylan's Mrs. Jones."
"Raptue" by Blondie: Fab Five Freddy and Grandmaster Flash.
"Runnin' Down a Dream" by Tom Petty: "Me and Del were singing..." (Del Shannon).
There's almost whole genre of country artists mentioning other country artists, "Are You Sure Hank Done It This Way," "Hank You Tried To Tell Me," "Bob Wills Is Still the King" and so on.
ETA: The Dead Milkmen's "Air Crash Museum" mentions several artists who died in air accidents: Patsy Cline, Buddy Holly, The Big Bopper, Jim Croce and Rick Nelson. Not Otis Redding, though.
I'm sure I'll think of more...
--Justin