The System was an environment created by the last surviving Charon out of energy from the Time Vortex.
It was a gas-filled globe that was fifty thousand leagues in circumference, inside an electrostatic Möbeus bubble-shell. It originally contained four planetary bodies called Wanderers, Prometheus, Aneas, Elysium and Reklon. A rogue planet, Planet X, penetrated the System some time before the Seventh Doctor's arrival, leading to the System's deterioration. The Charon that created the System lived in the orrery-room at the heart of the System's sun.
The System was inhabited by sub-beings created by the Charon, but they all eventually were destroyed, malfunctioned, or unexpectedly died. After that, most of the beings living in the System were hybrids of humans, Draconians, Silurians, Sasquatches, Solarians and other species.
After the Seventh Doctor confronted the Charon, it asked him to kill it, having endured millions of years of loneliness, and he agreed. The System collapsed into a single planet in the real universe, with Planet X becoming its moon. (PROSE: Sky Pirates!)