It's used by the parents and school administration to determine appropriateness of grade acceleration. It does not have anything to do with subject acceleration, I don't believe. (Please correct me, someone, if I'm wrong about that.)
It is not a test that the child takes; it is a series of questions that the adults answer. It takes into account things like the age of any siblings and social development, but weights everything in such a way that these considerations are not taken too seriously. It is a well-respected tool.
We didn't use it because we opted for homeschooling instead of grade-skipping, so I can't offer any personal experience. But it is a useful tool, provided the school answers honestly and doesn't try to skew the results unfairly. This does happen sometimes, sadly.
