Carrier IQ gave mobile carriers the ability to gauge the performance of their networks and services; for example, finding out why calls may have been dropped. But as noted, it can be used much more invasively. Exactly what data Carrier IQ's software collected and how it was used was up to the carriers, however, and none of the companies that used it then, or which may still be using it now, have ever revealed how they were using it.
Carrier IQ's diagnostics software resides on mobile handsets, but handset makers typically install it at the behest of carriers who use the data to improve network performance and customer service. Several US carriers relied on Carrier IQ's product, but at least one (Sprint) ceased using it several years ago after its capabilities raised concerns over possible invasions of privacy. Those concerns led to a series of class-action lawsuits filed four years ago that only now appear to be nearing a resolution.
AT&T and T-Mobile are believed to be the last two major US carriers still making use of Carrier IQ's software.
See "AT&T Brings Carrier IQ In-House" - here.