Iron Ore is the second tier of smelt-able metals after Copper Ore. It can be found almost everywhere in small to medium sized veins. It is hard to distinguish from stone, especially in poor/colored lighting. It is used in tools and armor as well as Furniture (both functional and cosmetic).
Since v1.2, there is a chance that your world will have all of it's Iron Ore replaced with Lead Ore during world generation, which will only allow you to craft Lead Bars instead of Iron Bars. Those two ore types may look different, but their functionality is the same. So you can make chains, chests etc. that would originally use iron to make. If lead is in a generated world, then iron will not be.