Power factor correction (PFC)
is used to correct what is called the power factor of an electrical
system. The power factor is a ratio of the active or real
power (P) flowing to the load versus the apparent power (S).
These two values are related to each other using a power triangle,
shown below, with S^{2 }= P^{2} + Q^{2} .

The angle of the active and
apparent power is the phase difference between the current and
voltage of the system. Therefore when there is no phase
difference this angle will be zero and the active power will equal
the apparent power and there will be a power factor of one.
Phase differences occur when inductive or capacitive loads are
present and one to correct these differences is by using the
opposite device. So for an inductive load, capacitors should
be used to improve the power factor. This is the basic
principle behind power factor correction.^{ }

Many ultility companies use PFC to increase effeciency and reduce the current drawn on their lines to reduce transmission losses.

For residential uses PFC does not help very much unless the curcuit contains many inductive loads such as washing machines or refrigerators.