what is the system enviornment?

Answer 1

A computer system consists of hardware components that have been carefully chosen so that they work well together and software components or programs that run in the computer (including the operating system). This combination of hardware and software constitute the system environment.
But normally the term system environmet refers to the area use to store data elements so all the components of the computer system could share a common definition throughout the system. To define the differents parameters with those commons values "Environment variables" are used. These environment variables are usually determined by which programs are running and the basic hardware and software characteristics. Some values define are your default printer, default language, location of the temp files, etc.

Answer 2

System environment is temporary space set by your system for some programs to use, e.g your temp folder, e.g when you install new programs, it temporarily uses that space (set in your system environment) to extract and store files until the program is fully installed, then the program on first boot will delete those temporary files.