I know that a device driver is a piece of software that enables the OS to communicate with a piece of hardware, but recently I've heard about INF files and have gotten quite confused. Some sources say that an INF file is used during driver installation, while others say that an INF file is used to provide information about the hardware. Even more recently, I came across the Intel Chipset Device Software (or INF Update Utility). What exactly does it do?
Both are correct. INF files are used during driver installations, and are used to provide information about hardware.
As Wikipedia states:
From Microsoft Technet:
INF files have been around since Windows 95. If you open a INF file using notepad (or another text editor) you can see it's a text document containing lots of paremeters (these parameters are explained in the Technet article I linked above).
In at least Windows 95 and XP, if you right-click an INF file, there is an option called "Install". Although I have had varied degrees of success installing drivers that way (always on INF files contained on folders from install/driver CDs), the recommended way of installing drivers is by running the setup.exe file on the CD the device comes with. Many times the INF file is there just as a part of the process.