Technically speaking, a Windows system file is any file with the hidden system attribute turned on. In practice, system files are those files that Windows depends upon to operate properly. These range from hardware drivers to configuration and DLL files and even the various hive files that make up the Windows Registry.
These files are often changed automatically during system updates or application installations, but generally speaking, it’s best to leave system files alone. Deleting, moving, renaming, or changing these files could cause a complete system failure. Because of this fact, often times they’re hidden and are made read-only. That said, there are a lot of hacks and tweaks out there—including a bunch we’ve featured on this site—that involve modifying system files.