After installing iOS 14.5, all apps are required by Apple to use the new AppTrackingTransparency framework to ask for your permission to track you. This only applies to tracking your activity outside of the company’s own apps! For example, Facebook can track your activity in Facebook, Facebook Messenger, Instagram, and WhatsApp without asking, but if it wants to know how you interact with other companies’ apps, or to track you across websites you visit, it must ask for your permission.
It’s safe to say that most iPhone and iPad users are unaware of the extent to which their activity is being tracked, or that apps regularly track what they do in other apps or across websites. Apple has a video that explains what it’s all about: