IAT =intake air temp
Purpose-= it keeps track of the air temp in the intake and uses that for the grid heaters (the grids may use the battery temp sensor) and vp 44 timing I think. It probably provides input for some other things as well but not sure. Many have reported that a dirty sensor can adversely affect fuel mileage. If you do a search on it I think you will come up with several threads on how to clean it and check for proper voltages
On my 01 it is the farthest back plug on the drivers side rear of the engine. Past the lift pump are 2 plugs first one is the map and the farthest one back is the IAT.