Adding an iframe to a Joomla 2.5 module can allow you place code that with made with an html or php file into the existing module. For example, you may want to recycle a php form that was made with a different php / mySQL application and use it in a Joomla page.
To add an iframe to a custom module with Joomla 2.5,
1) Select 'Module manager'.
2) Select 'New'.
3) Select 'Custom HTML'.
4) Add iframe code
5) Click 'Save'.
To allow iframes with Tiny MCE editor,
1) Select 'Plugin Manager'
2) Select Editor - Tiny MCE
3) Under 'Basic Options' look for 'Prohibited Elements'.
4) Remove iframe from the list
5) Select 'Save' or 'Save and Close'.