What is a "System?"
A "system" in the context of an Immersive Sim is a rule within the game world that works consistently. For example, in many games picking up an object and throwing it at a surface will generate noise that can distract enemies. The "noise" generated is a system and can be produced regardless of what item is thrown, and it can distract enemies regardless of the type of enemy as long as it is close enough to hear the noise.
Another example of a system would be the explosive canisters from Prey (2017). These objects can be picked up and moved around by the player and will explode when shot at. These two rules work consistently, even if they are being shot at by an NPC or a turret instead of the player.
How Is This Different From Scripted Sequences?
A common thing in game design is to have scripted sequences of events. If a player enters an area, a cutscene might play showing off a crucial story moment. Then, after this cutscene ends, a door could unlock and a new area becomes available. This is essentially the opposite effect of what "systems" in Immersive Sims try to accomplish. Systems are intended to feel natural, like they came about from the game world organically without the developer being directly responsible for them occurring.
Systems are one of the most important aspects of this genre, as without them it wouldn't be possible to have emergent gameplay. And what is emergent gameplay...?