What is purpose of using System.img in Android?

Question

What is meant by System.img in Android? What is the purpose of using it?

Answer 1

It's the Android file system, which means all the support files that Android needs, the applications, but also the framework, the Dalvik VM, initialization scripts and so on.

Another part of the file system would be the userdata.img which is mostly empty when you compile the framework.

It is not the OS, that would be either a plain zImage or boot.img (and recovery.img for to boot in recovery mode).