Filter carbon is a manufactured product. It is sometimes confusingly called charcoal; it is in fact a carbon material that has been treated in high temperature without oxygen.
There are many types of carbon. Filter carbon is commonly made from coal, but coconut shell carbon is becoming popular not only because it is made from a renewable resource but also because it produces very good tasting water and is particularly good at removing trihalomethane (i.e. disinfection by products).
Carbon filters remove chemicals by the process of adsorption (don’t be confused with absorption). Carbon attracts certain chemicals at the molecular level much in the way that a magnet attracts and holds metal filings. When the surfaces are full or mature, the filter must be discarded and replaced.
Timely cartridge replacement is very critical, because filter carbon has different capacity for different contaminants. Many people rely on chlorine removal tests to determine when filter carbon should be renewed. But this works only if chlorine removal is all you expect from the filter. Most carbon filters will begin to “leak” other chemicals long before they begin to allow chlorine to pass. It should, hence, be replaced annually although it will still have lots of chlorine removal capacity left.