"According to the Monster Manual, the creature you encountered is called a ... dra ... dra-gon?"
If you're looking stuff up, you're breaking immersion. You're stopping the flow of the narrative and the game play ... but by not being decisive and having answers as the DM, you are losing the trust of the table. You never see a referee looking at a basketball manual. He makes a decision and keeps the game going. And the Dungeon Master needs to be ready to pick up the slack if there is confusion or argument over the rules, to KEEP THE GAME MOVING.
DnD is a game of minutia. When no one person is the master of minutia, things start to break down. If the DM isn't the authority on the rules, someone else will be. Trust me, there is very little worse than enduring two people arguing over whether drinking a potion is a minor or move action for 10 soul-sucking minutes. When you don't know the rules, you can give players an undue advantage, waste time, or generally just bore people over the course of an evening.
So, what's the obvious takeaway? Read the books, all of the books, many many times. Take notes. Underline and highlight. Put little labeled flags next to frequently used sections and tables. Write down rules in your DM notes that may come up in the session (navigating at sea or drowning for an aquatic adventure for instance). Be especially familiar with the table of contents and the index. Know the rules. Know how to access the ones you don't know. I must have read the 3.0 Player's Handbook at least 10 times cover to cover before I had ANY clue how to play. I was 10 at the time but still. Know the rules.
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