What does the Android system app do?

System apps can easily access some platform(app-framework) level API call”. System apps are pre-installed apps in the system partition with your ROM. In other words, a system app is simply an app placed under /system/app folder on an Android device. /system/app is a read-only folder.

What is a system icon?

System Icons: System Icons are displayed along left edge of screen. These icons are created automatically by windows during its installation. Example of some system icons are My Computer, Recycle Bin, My Documents, Internet Explorer etc.