I'm going to decline writing what CHKDSK does and note it won't repair damaged files or a damages OS. For that the tools vary with the OS. Sometimes it's SFC /SCANNOW and for other OSes it's something else.
With all the malware out there, CHKDSK is only a minor tool in the kit.
Bob
Recently because of serious system instability, I ran chkdsk to see if the problem was related to bad clusters. Of course Chkdsk found a string of errors, reporting things such as "deleting corrupt attribute record...", "deleting index entry...", and so on. After a long wait, the system rebooted, but I found my system even more unstable. Later I found out through the Event Viewer that Chkdsk did 'something' to numerous files in attempt to repair them. Among those were Windows core system dll's. When I tried to look for those files, they did not exist anywhere on the hard drive.
I am afraid that maybe Chkdsk didn't do a good job repairing the flies. Perhaps what Chkdsk did was just overwriting the bad sectors? I thought at least Chkdsk could move the file segments on that specific sector to another healthy sector to maintain file integrity. I dare not to use Chkdsk again in the future, lest it should delete files by accident, rendering software, personal data, or even Windows useless.
My question is: should I expect Chkdsk to repair the hard drive while also maintaining data integrity? Or is there any other way to do exactly the tasks mentioned above?

Chowhound
Comic Vine
GameFAQs
GameSpot
Giant Bomb
TechRepublic