A computer system consists of various interconnected components that work together, including hardware devices and software programs. It allows users to input data using devices like a keyboard and mouse, processes the data, and outputs the results through devices like a monitor. The main internal hardware components are the system unit, monitor, keyboard, and mouse. External or peripheral devices include input devices to send data to the computer and output devices that provide output from the computer to the user. A computer system runs using both system software like the operating system, and application software that performs specific tasks for users.