definition
Activated carbon is designed primarily for chemical and micro-mechanical filtration.
The "activated" bit of carbon is a process in which the carbon material is made super porous. These pores increase the surface area of the material and improve the rate at which carbon can adsorb.. stuff. What stuff? Things like tannin, chlorine, and material that generate not-so-happy smells.
in practice
But maybe examples and current carbon applications will make more sense. Activated carbon is used to purify our drinking and tap water supplies and is also a key component in those odor-less kitty litter products.
Is your tank water looking a little yellow/brown? Carbon is probably the key to fixing that right up.
On a side note, carbon does need to be occasionally replaced. Once it reaches maximum capacity, the granules will no longer adsorb particles and may even release it instead.