What is power factor and why is it important in AC circuits?

Power factor (PF) is the ratio of real power (W) to apparent power (VA), equal to cos(phi) where phi is the phase angle between voltage and current. It ranges from 0 to 1, with unity PF being ideal. Low power factor means more current is needed for the same real power, causing higher losses, larger conductor requirements, and utility penalties. Industries target PF above 0.9 through capacitor banks or synchronous condensers.