The functional test is typically performed in the last phase of the production line of a product, as a final quality control. FCT are performed to ensure that the device under test (DUT) fulfills its functional specifications.
FCT consists in emulating or simulating the operational environment of the product in order to check its correct functionality. The environment includes, as an example, any device that communicates with the DUT, the power supply of the DUT, loads necessary to make the DUT work properly...
Test software is the one that allows production line operators perform the functional test in an automatic way through a computer. To do this, the software communicates with external programmable instruments as Digital MultiMeter, I/O boards, communication ports,... The software in conjunction with the test fixture that interfaces the instruments with the DUT, make possible to perform a FCT.
refer to wiki:FCT