[DanBC]

Put simply, lower power factors are inefficient. They draw more current, which means the components are either stressed or need to be bigger to compensate.

(This is all a big simplification): DC power is pretty easy to get your head around. In a resistive circuit you have a nice easy P=IV. But for AC circuits that include capacitance or inductance you sometimes get the current out of phase with the voltage. So you end up with "real power", "apparent power", and "reactive power". For some circuits you can balance out these inductive and capacitive loads. In the UK in the past factories that had a lot of motors (inductive loads) would also have big capacitor banks to help balance these out.