BMI (Body Mass Index) is used by many entities, from the CDC to private insurance agencies, to determine if a person is overweight.
The BMI measurement arbitrarily categorizes a person as underweight, ideal, overweight, or obese. BMI does not account for body type, musculature, or gender. This can cause a large boned or muscled individual to be classified as obese.
This categorization can then be used to set insurance rates, deny coverage, or simply not allow a boy scout to attend camp.
While obesity is a serious issue that needs to be dealt with, we can't do this properly until we have valid data. There are many alternatives out there to consider.
NPR has a good summary of why this should change:
http://www.npr.org/templates/story/story.php?storyId=106268439