This chapter focuses on how people use identity categories for adaptive decision-making and how they strategically apply signals of identity. Adopting a functional view of identity for communication and behavior allows us to focus on the forces that shape their use. I will first make it clear that signals of social identity often encode meaningful information for decision-making. I will then review specific perspectives on how selection by consequences has shaped the use of identity signals to more adaptively facilitate social learning, partner choice, and coordination, followed by a consideration of how those uses have changed in a world characterized by diversity, anonymity and the Internet, and political polarization. Identity is constructed for functional purposes, and is therefore only essential insofar as forming categories and legible cultural artifacts are essential features of human activity.