From the Embedded Processor and Microcontroller primer and FAQ:
...embedded processors and microcontrollers are frequently found in: appliances (microwave oven, refrigerators, television and VCRs, stereos), computers and computer equipment (laser printers, modems, disk drives), automobiles (engine control, diagnostics, climate control), environmental control (greenhouse, factory, home), instrumentation, aerospace, and thousands of other uses. In many items, more than one processor can be found.
Microcontrollers are typically used where processing power isn't so important. Although some of you out there might find a microwave oven controlled by a Unix system an attractive idea, controlling a microwave oven is easily accomplished with the smallest of microcontrollers. On the other hand, if you're putting together a cruise missile to solve the problem of your neighbor's dog barking at 3 in the morning, you'll probably need to use processors with a bit more computing power.
Embedded processors and microcontrollers are used extensively in robotics. In this application, many specific tasks might be distributed among a large number of controllers in one system. Communications between each controller and a central, possibly more powerful controller (or micro / mini / mainframe) would enable information to be processed by the central computer, or to be passed around to other controllers in the system.
A special application that microcontrollers are well suited for is data logging. Stick one of these chips out in the middle of a corn field or up in a ballon, and monitor and record environmental parameters (temperature, humidity, rain, etc). Small size, low power consumption, and flexibility make these devices ideal for unattended data monitoring and recording.
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