In a democracy, the people of a polity hold the sovereignty. True democracies give sovereignty over every decision to the people, while representative democracies give them the ability to choose the representatives who wield sovereignty in the people's stead.
As pointed out by the University of Vermont, ancient Athens is an example of direct democracy in which the citizens of a polity exercise direct political sovereignty. Though the democracy of Athens limited citizenship to a small segment of the city-state's male population, all of those men were directly involved in political decisions. Modern representative democracies like the United States do not allow citizens to vote on every piece of policy. Rather, the citizens invest their sovereignty in representatives at the municipal, state and federal level. These representatives make and pass legislation. However, the people get to choose who their representatives are, which leaves the ultimate power in the hands of the citizens.