By definition, the power factor is a dimensionless number between -1 and +1. Power engineers are most often interested in the magnitude of the power factor, as the sign reveals only whether power is being supplied or consumed (and this is usually already known). Note that although the value of the power factor reveals the magnitude of the phase angle, it does not reveal whether it is positive or negative. Thus, the power factor is specified as leading or lagging. When the load is purely resistive, the power delivered to it is equal to the product of volts and amperes, so the power factor is unity. When the load is inductive, e.g. an induction motor, the current lags the applied voltage, and the power factor is said to be lagging. When the load is capacitive, e.g. a synchronous motor under certain conditions or a capacitive network, the current leads the applied voltage, and the power factor is said to be leading.

A power transmission system is working at its greatest efficiency when the power factor is unity. When the power factor is less than unity, the transmission losses increase and the system capacity is reduced. Power companies therefore require customers, especially those with large loads, to maintain, within specified limits, the power factors of their respective loads or be subject to additional charges.

It is often possible to adjust the power factor of a system to very near unity. This practice is known as power factor correction.