Be it logging it to graph their usage patterns, notifying you when they're online, you name it! They then, well, do whatever they want with that data. Third party applications use these APIs and poll them just as the official application does. If you poll it over time, you'll be able to tell when a user transitions from offline -> online or vice versa. The point is that there's a request that periodically goes out (i.e polled) which gives you the online status of your friends. That is, an API used internally which isn't intended to be used by anyone but facebook developers and thus holds no promises and will break all the time if you try to use it.

Well, the state of that dot, or rather the data that indicates their status, is fetched by an undocumented or unofficial API. On Facebook Messenger, there's a little green dot displayed beside their name which indicates that they're online, right? Just like this:

If you don't feel like reading it and digging into the technical details or reading the whole thing, I'll provide a brief summary of how it works here. Here's a (comically written) blog post explaining how it's done with Facebook. The conceptual difference is negligible for any app that provides an online status feature so I'm going to use Facebook's Messenger as an example since I'm more familiar with it. I can't speak for Whatsapp as I'm not a user or much less familiar with their internal API, but I have played around with this in Messenger. While Whatsapp or Facebook Messenger don't provide an official API for online status, it's often easy to use their unofficial i.e internal API to determine it.

Whatsapp online status tracker