Network Interface Cards (NICs) receive all frames in a network. Each frame will have source and destination MAC addresses. Each NIC is identified through MAC address (also called as Physical Address, Hardware Address, Ethernet Address, etc.).

Once a frame is received, NIC checks if it is the intended recipient of the frame by matching destination address and its own MAC address. In normal operation, it accepts that frame only if there is a match.

In the other mode of operation, the NIC, once entered into that mode, accepts all frames regardless of the destination address. This mode is called promiscuous mode.

Promiscuous mode is generally used for Debugging network issues, network driver issues, packet sniffing, etc. tcpdump, ethereal, wireshark are the examples for packet sniffing tools. You can find a list of such tools here.