System characteristics refer to the inherent properties of an electrical system, such as its response to inputs, stability, and performance metrics. Compensation involves techniques used to modify these characteristics to improve system behavior, such as enhancing stability or response time. The relationship between system characteristics and compensation is crucial, as effective compensation strategies depend on a clear understanding of the system's dynamics. Properly designed compensation can lead to optimized performance and reliability in electrical systems. Understanding these concepts is essential for effective system design and analysis.