Functionality in HCI refers to the underlying things a system can do, for example, the functionality of a photo editing application is that it can crop, rotate, or scale an image. There is a separate question as to how to make this functionality available in an actual user interface
In some settings, especially for business systems, essential functionality is part of the requirements of the systems and the user interface has to be designed to provide this functionality, even if this sometimes compromises usability. For consumer-facing applications there may be a trade-off between functionality and user experience, for example, choosing a reduced functionality in order to provide ease of use in a smart phone camera, or faster snap-to-post for social media.
Sometimes functionality, usability and user experience are portrayed as levels in a pyramid inspired by Maslow's hierarchy of needs.
Used in glossary entries: Maslow's hierarchy of needs, usability, user experience