System Restoring And Formatting

I was wondering, since a system restore is basically restoring your system to a state it was at before, does it have anything to do with files you have deleted/moved etc. (will a system restore undo file deletions?), or does it have only to do with things like the registry? (restoring key entries in the registry) What does it have to do with and not to do with? Secondly let's say you purchased a dell, it's going to be at factory condition, meaning it has windows and a bunch of other stuff on it. You install a fresh copy of windows via a windows cd, thereby deleting every driver and utility on there and have only a seemingly useless thing.

1. Will a system restore bring your computer back to factory condition? (the way it was when you bought it)
2. I also guess you can do a system restore if and only if you have a system restore point. How do you make one and how can you tell you've made one before? (in other words how can you tell you made one at a certain point and how it is like? Or, if someone else made one for you, how can you check this and what the restore point is like?)