The new feature is available for both person-to-person chat and group chats. It is quite easy to use.
All you have to do is long-press on the message you want to quote, when you do this, you’ll see a REPLY button at the top of your screen right next to the STAR icon. Click on it and the message you want to quote will show up and there’ll be a box for you to type your reply.
When you send the reply, it will show up in the conversation with the quoted message attached on top of it, along with the sender’s color-coded name.
This feature is more useful in group chats where a lot of people are chatting all at once so you can easily quote the message you want to reply to avoid confusion.
This feature is currently available on the latest beta version of whatsapp. However non beta testers can download the latest version from apkmirror here.