SharePoint System Account

SHAREPOINT\System account is the same account used by application pool of your SharePoint web application in IIS at the time of creation/extensionof respective web application.This is the account which is used when you run your code in under elevated privileges by SPSecurity.RunWithElevatedPrivileges.When you create/extend a web application in SharePoint and specify an Application Pool then the identity (Network Account) used by that Application pool becomes the SHAREPOINT\System account.It is highly recommended that end user should not be allowed to use this account to avoid unexpected errors.If you change the identity of App Pool account after creating/extending the SharePoint web application, the new account will not become the SHAREPOINT\System.