The restictions are due to their use in one method of meth production. They are restricted, not outlawed. Sellers are supposed to maintain a log book of sales.
They can also be used to make a very unstable explosive or a homemade antiseptic.
The use likely refered to is in water treatment. Iodine is in many ways superior to chlorine as long as one doesn't have thyroid problems or allergies to iodine. Crystals will store forever, and can allways be used to make a known strength solution. One way is to shake the crystals with water to produce a saturated solution. if you know the temp, you know the strength of the solution. There was/is a commerical product called polarpure that did this. Polarpure was expected to be pulled from the market due to the DEA regs (every camping store would have to maintain a logbook, even though the iodine in PP was in small quanities and probally cost 50 x what bulk crystals do.) My preference is to make a solution of iodine in alcohol. Much more concentrated/no temperature dependance/won't freeze. A local pharmacy made it up for me prior to the current restrictions since they had both the alcohol (I'm sure vodka or ever clear would work) and the bottles with out a plastic seal. Then then sold me the remaining crystals. The pharmicist said it was the first time he had compounded something in years.
BTW, polar pure bottles are glass (iodine is a halogen), and if you breaks in your BOB, it will turn everthing a hypertatical iodine brown. Even dayglow tree flagging, orange ACR strobes, or yellow pellican lights. It will then put a matching stain on the backpack and back of the truck seat.