The amplitude variation of the coherent optical time domain reflectometer(COTDR) measurement curve is greatly affected by coherent Rayleigh noise, which leads to system false alarms and system performance degradation. The paper describes the mechanism and influencing factors of coherent Rayleigh noise in COTDR system, the quantitative relationship between each factor and the Rayleigh scattering coefficient is given, and simulates the impact of the fiber refractive index, spatial resolution and the frequency variation of laser source on the interference fading waveform in detail. Finally it summarizes the main methods and limitations of reducing the interference fading in view of changing the laser frequency in COTDR system. Several important applications of COTDR are given, including the monitoring of ultra long communication optical fiber link and the subway tunnel.