Iodine is used for spying out other bases. In order to successfully spy out a base you will have to send more iodine than the amount which is stored in the according habitat.
For instance: should there be 8000 iodine in the habitat which is to be spied at, you will have to send 8001 iodine, only in this case your spy will return with a report. Also the according player being spied at will not be notified. Should you be sending 7999 iodine, your spy will be captured, this will cost the other player 7999 iodine. He will however be notified about this.
You can barter iodine for resources within the black market, the higher the level, the better the exchange rate.