Hi LEM
In an AC circuit, the amount of power able to be converted into heat (or used to do work) is known as TRUE POWER, measured in Watts (W). In a purely resistive circuit, 100% of the power drawn is TRUE POWER (aka EFFECTIVE POWER). This is the power we want!
All AC circuits comprise current flowing through impedance (the vector sum of Resistance, Inductive Reactance and Capacitive Reactance). In a circuit where all of the impedance is resistance (eg a 'perfect' resistor), the circuit's current and voltage will be in phase, and all the circuit's power will be TRUE POWER. If we add inductive loads to the circuit however (such as motors, coils etc as HotDog mentioned), we cause the current to lag the voltage to the point where, in a purely inductive circuit (not practically possible), the current would lag the voltage by 90 degrees (by virtue of the back emf produced). In this situation, none of the circuit's power would be useable to do work - its voltage and current are 90 degrees out of phase. This type of power is known as REACTIVE POWER, and is measured in Volt-Amps-Reactive (VARs, kVARs if you have thousands of them). Whilst REACTIVE POWER is unusable, it still imposes loads on the generating and supply network as though it were useful (TRUE) power. This is the power we don't want!
The vector sum of TRUE POWER and REACTIVE POWER is known as APPARENT POWER, and measured in Volt-Amps (VAs). Graphically speaking, one can determine the magnitude of APPARENT POWER in a circuit by plotting TRUE POWER on the Y-axis, REACTIVE POWER on the X-axis, and APPARENT POWER as the resultant of the two.
As HotDog said, the POWER FACTOR is equal to TRUE POWER/APPARENT POWER (POWER FACTOR also equals the Cos of the phase angle between voltage and current in the circuit - the phase angle is also equal to the angle between the Y-axis and the APPARENT POWER resultant in the abovementioned graph). Ideally we want a power factor of 1 - in this case, 100% of the power consumed is being used to do work. In reality this is impossible to achieve, and represents a circuit that is purely resistive, with no inductance whatsoever. More realistic is a PF of about 0.8 or 0.9, as HotDog mentioned.
I hope this helps!
IORRA