Here is a classic analogy using beer that will help you to better understand power factor...
Imagine you have a freshly poured mug of your favorite brew sitting in front of you.
The drinkable portion of your beer is represented by Real Power (expressed in kW). Real Power may also be called Actual Power, Active Power or Working Power. This is what actually powers electrical equipment and performs useful work (in this case, quenching your thirst).
Along with your brew comes a little bit of foam, and that foam just isn't going to do anything useful, so consider this undrinkable portion of your beer to be Reactive Power, represented by KVAR. This is the power that magnetic equipment like transformers, motors and relays need to produce their magnetizing flux. Think of the foam as a reaction from pouring the beer.
The combination of drinkable beer (kW) and foam (kVAR) inside of your mug represents the Apparent Power, or KVA.
Power Factor is simply the ratio of Real Power (kW) to Apparent Power (kVA) and is represented by the following formula: PF = KW / KVA.
Using our beer analogy you could write the formula like this: PF = Beer / Drinkable Beer + Foam.
For any given KVA,the more foam you have (the higher the percentage of KVAR), the lower your ratio of KW (beer) to KVA (drinkable beer + foam). Thus, the lower your power factor.
The less foam you have (the lower the percentage of KVAR), the higher the ratio of KW (drinkable beer) to KVA (drinkable beer plus foam). As your foam (or KVAR) approaches zero, the power factor approaches 1.