System software includes operating systems, programming tools, and utility programs. It manages computer hardware resources, supports the development and execution of application software, and allows communication with peripherals. Application software is designed to solve specific problems or tasks and can be general purpose, like word processors and spreadsheets, or special purpose, like inventory management systems. The key differences between system and application software are that system software controls and coordinates the computer system itself while application software is designed for specific users or tasks, and generally relies on system software to execute.