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I think Carrier Frequency Offset(CFO) is used in Frequency Shift Keying(FSK) modulation technique,where in the frequency of the carrier is varied from its offset value depending on whether the input data is logic 1 or logic 0.
Hence, FSK signal has two frequencies - mark and space frequencies.
Iam not 100% sure, but i think i've given a valid answer.
In a comm system, CFO refers to the difference in carrier frequency at transmitter and reciever. The Tx would transmit at the nominal carrier frequency. At the Rx the unmodulated frequency is required for reception; and is usually generated in the Rx with crystals or so. However, it is not physical possible to make the Rx frequency exactly match the Tx frequency. This offset is termed CFO.
The input carrier frequency at the reciever can vary due to doppler effect, caused by relative motion between Tx and Rx and is another source of CFO.
In both cases, it is reqiured to reduce this offset to a minimum for proper performance.