Carbon is used in almost every modern water filtration product. In some cases the carbon is the primary or only means of filtration but often carbon is used as a complementary media with other technologies. Every reverse osmosis and distillation unit I have ever encountered uses a carbon filter as a pre or post filter. In the processes of distillation, some VOC's will evaporate right along with the water so a carbon filter is necessary to get good water. Similarly, with reverse osmosis, some compounds that are not filtered out are readily adsorbed by a decent post carbon filter.
Carbon's atomic structure allows it to easily bond with many elements and compounds. This affinity for creating bonds means that carbon has a high potential for adsorption (not to be confused with absorption). To increase the adsorption potential even further, oxygen is introduced at high temperatures into the carbon create a porous matrix. This increases the surface area dramatically and allows the carbon to hold a large amount of material.
For drinking water filtration carbon comes as either granulated or extruded into a solid block. The granulated activated carbon material is the black gravel you see if you break open the filter of a pour through pitcher filtration system. The solid block material is found in higher end point of use water filter systems. The solid block is preferable. With the granular activated carbon (GAC), water can find paths around the granules and a portion of the water can potentially make its way through the filter media without coming into contact with the carbon. In a solid block structure much more of the water will come into contact with the carbon material. Furthermore, to increase the effectiveness of the carbon filter the amount of carbon can be increased or the flow rate can be reduced to increase the contact time with the carbon. Companies like Multi-pure, Waterchef, and Amway have proprietary sized cartridges that are larger than standard 10" filters and thus have better filtration characteristics.
What type of drinking water filtration system you choose should depend on the quality of your tap water. In many municipalities, a good carbon block water filter will suffice. A common concern of many carbon block water filter users is that the carbon does not adsorb fluoride. If fluoride is a big concern, I would recommend a reverse osmosis system or a high quality distiller that has a built in carbon filter. After 12 years in this industry and much research, my professional opinion is that a good carbon block filter is the way to go.