Factions are a collective body that control stations, ships, and big asteroids. They determine ownership of sectors that these objects are in. The player may interact with them through the means of ships and stations, and depending on the relations, buy goods or get outright attacked.
Factions are capable of being self-sustaining by being able to rebuild ships and stations. When a faction attempts to rebuild a station, they will create construction zones for said station, but only in sectors that aren't marked as hazard zones. Larger factions can have more concurrent construction zones.
Along with construction zones, factions also have a finite number of military ships, which eventually replenish over time, if some were to get destroyed.
Factions have traits that affects the faction in some way. This can include a faction having more military ships, or even a faction having less patience during a tribute payment. A faction is given several traits, some of which match the faction more heavily than others. A "Very" trait will cause a trait's effects in that faction to happen more than typical, and a "Somewhat" trait will cause a trait's effects to happen a little less than typical, but still happen.
When a faction has very low relations with another warring one, and some ships of the latter linger in their territory for too long, then there is a chance that a squad of headhunters will be deployed after them. These squads tend to have high firepower, and one of the ships brings a proximity hyperspace jammer, so it is mandatory to be prepared when facing them.