The thyroid produces T4 and T3, but it is T3 that is more active (3x more active than T4). In the periphery, therefore, T4 is deiodinated to produce T3. 80% of T3 comes from peripheral conversion. T4 can also be converted to metabolically inactive reverse T3.
Reverse T3 is helpful to determine non-thyroidal vs thyroidal illness in the setting of low T3 (Low T3 syndrome). Due to low T3 one might assume that the thyroid is not working, however in non-thyroidal illness the decreased T3 is due to increased peripheral conversion of T4 to reverse T3. In this case testing would show increased rT3, decreased T3, and normal FT4 and TSH. Versus in true hypothyroid, T3, T4, and rT3 are all low... TSH is variable.