It is mostly used by Necromancers and Witch Doctors. Assassin also utilizes the Mind Blast skill, and Berserk spell works in a similar fashion. Some skill runes, such as Barbarian Stupefy, will confuse an enemy as well.
While under such effect, monsters attack each other. However, unlike Charm (which completely brings the victim under the caster's control, making it follow the caster and use the special abilities on caster's behalf), Confusion causes enemies to attack its former allies and follow its master, but prevents the target from using any of its special abilities: confused enemies will only use the basic attack.
In Diablo II, monsters can still turn on the hero when they see no other targets, but in Diablo III, they will just wait for the opportunity to fight someone else (besides the hero and their allies) until the effect wears off. This makes Confusion a less potent effect than Charm, but in return, Confusion effects last much longer and / or affect multiple foes.
CC resistance reduces the duration of Confusion. Players and Bosses are immune to it.