Simply put, the factors are the controlled independent variables in an experimental study that can be manipulated by the experimenter. These variables are referred to as the factors. These factors can influence each other or influence another variable (response variable) or simply the response of the overall system. The factors may have two or more levels, the combination of which is called treatment.
An ideal example is the experimental study of the quality of education at a specified university. This will include factors like the quality of the teaching faculty, the quality of incoming students, the infrastructure involved, the management of the university etc. One way of identifying the critical factors in an experimental study is by a method called factor analysis. It is a data reduction process that reduces the number of variables to a limited number of factors.
So factor analysis basically
i) identifies the number of factors
ii) defines the factors
iii) studies the factors that have been defined. Factor analysis can be exploratory factor analysis as well as confirmatory factor analysis.
Exploratory factor analysis identifies complex relationships of items and confirmatory factor analysis tests the hypotheses which are associated with particular factors.