Windows System State is designed primarily for disaster recovery by restoring the registry, boot files, system files, Active Directory, and more. When used correctly in combination with a File System backup, a machine can be brought back to the exact state it was in at the time of backup.
A walkthrough of a complete system recovery, including File System and System State, can be found in Bare Metal Disaster Recovery with ZCB.
The entire contents of the Windows System State backup will be restored. Selective restore of individual System State components is not possible.
By default, System State will restore to the Original Location and Overwrite Existing files.
System State restores have additional requirements.
System State restores to a Domain Controller with the Active Directory role can be very complex. Please refer to How to Restore System State on an Active Directory Domain Controller for full details.