Activated carbon, is used as a chemical filtration media. It helps to remove many organic and inorganic materials dissolved in tank water -- it keeps the aquarium water clear, and removes odours.
Activated carbon works by using Absorption, a process by which pollutants are trapped in the pores of the carbon.
Activated carbon also helps with Adsorption, a process by which pollutants are chemically bonded to these sites and trapped by the carbon.