IFRAMEs are used to embed and isolate third-party content into a website.
Most of web advertising solutions are based on iframes - because they give security (cross-domain policy) and isolated rectangle on screen which can be fully managed by third party content and scripting (a common use case is advertisments).
Another modern use of IFRAMES is a management of history (common back button workaround) of AJAX applications.
FRAMEs are poor version of IFRAMES. Their use is declining.
