Inactive
The Inactive check box is used to designate that a record is inactive and should not be used.
When a record is set inactive, you can still use and edit the record, but all fields will be grayed out.

Inactive records also appear grayed out in the Edit list and in Lookup lists.

Suggested Use
There will be times when you want to set a record inactive rather than delete the record. For example, if you have reports or logs that rely on a record, you would want to set the record as inactive rather than delete it. Another example may be to temporarily flag a customer that you don't want to sell too until they get caught up paying their bills. And finally, since you can't delete a record if there are any dependencies to it, you may need to set it inactive until you can locate and delete the dependencies.