Fall Factor is simply the length of the fall divided by the length of the rope from faller to the fixed point, whether belayer or anchor. Out Fall Factor 2 is the maximum that you should encounter in a typical climbing fall, since the length of an arrested fall can't exceed two times the length of the rope. Normally, a Fall Factor 2 can only occur when a leader who has placed no protection falls past the belayer, or the anchor if it's a solo climb. As soon as protection is placed, the distance of the fall as a function of rope length is lessened, and the Fall Factor drops below 2. Your life depends on the stretch of the rope.
Fall factor is one of the elements that govern shock force.
The other two are the nature of the rope, and the weight of the falling object. That is, you. Thus, climbing safety systems are designed around the shock absorbing quality of dynamic rope. It cushions the fall, reducing the impact force and the chance of system failure. Thus, the rest of the gear can be designed to work with this known maximum force.