Factor analysis is to reduce a set of variables to a set of new variables. It can be done through many methods and the variables are reduced to a set of lesser variables. In other words the process of making a reduced set of new and useful variables from a set of many variables is factor analysis.
It is that process with which the number of variables can be combined together in to a single factor. For instance throwing a ball, batting, bowling and weight lifting can be combined in to a single term such as athletic ability. It can also be used to identify the groups of inter related variables so that they can be related.