Power factor is a measure of how efficiently the load current is being converted into useful work output. A poor power factor occurs when a load is drawing more electrical energy than is necessary for conversion into a given amount of useful work.
Equipment that is likely to impact power factor includes heavy load appliances, such as air conditioners, welding sets, AC motors, arc furnaces, high bay and fluorescent lighting, and transformer-based appliances, such as laptops and computers.
Power factor is calculated using a ratio of real power (kW) to apparent power (kVA), where apparent power is the sum of real power (powering work) and reactive power (not powering work but required by some equipment for it to operate eg creating a magnetic field). This results in a score between 0 and 1.
A system with PF 1 has 100% of the supply being used efficiently; PF 0.5 means half of the power is being wasted or used inefficiently. Once a system produces less than PF 0.9 (90%), it requires correction.