It is a ratio of Real Power, in total kilowatts, to total Apparent Power, in kilovolt amps.
Most electric motors have a lagging power factor.
The operation of electrical systems with low power factor results in voltage increases and power losses, reducing the overall power carrying capacity of the power supply system. As an incentive for customers to operate at high power factors, utilities assess power factor penalties to customers whose overall power factor falls below certain levels. Real power is expressed in kilowatts. Reactive power does not provide useful mechanical work. However, most AC motors do require reactive power for developing magnetic fields.