A Factory Reset is the equivalent of a nuclear bomb since it erases everything and enables you to start from scratch.
Unlike Factory Reset’s “back to square one” approach, System Restore is more granular. It allows you to take many snapshots of your OS in different states. Then, when a problem appears, you can use System Restore to restore your OS to one of those states. It only affects the OS’s “core files” and leaves everything else untouched.
Thus, System Restore is optimal for reverting your OS to a state before a software update that causes freezes and blue screens. Factory Reset is a more drastic option for more severe issues, like a malware infestation that doesn’t disappear even after a format.