Both questo and quello can be used as demonstrative pronouns, e.g.,
questo = this one
questa qui = This one here. (If the “thing” in question is feminine singular.)
quello = that one
quelli lì = Those ones over there. (If the “things” in question are masculine plural.)
When questo e quello are used as pronouns, they function like all other pronouns (they take the place of something or someone, usually to avoid repetition or for reasons of emphasis or clarity).
As pronouns, both questo and quello have four forms, e.g., questo/a/i/e; quello/a/i/e. For example,
Quale romanzo leggi? –questo o quello?
Which novel are you reading? –this one or that one?
Leggo questo qui. = I’m reading this one (right here).
Quale camicia metto? –questa o quella?
Which shirt should I wear? –this one or that one?
Mettiti quella. = Wear that one.
Quali ragazze conosci? –quelle a sinistra?
Which girls do you know? –those to the left?
Non conosco quelle ma vorrei conoscerle! I don’t know those (girls) but I’d like to know them!