What is the difference between application event and system event in Salesforce?

Application Events: This event can be handled by any component which is listening to it. It is a kind of publish-subscribe modal. It is used to communicate any change in the component to a broader audience. Any component who has registered for this event will get notified.
System Event: This event is automatically by the framework such as during component initialization, attribute value change, rendering, etc. All Components can register for system events in their HTML markup.