X-Factor (aka XF) is a universal power-up move that powers up your characters for a limited time. During X-Factor mode, your characters goes into a Godlike-RAGE-Power-up Mode and will destroy any character with one combo [/partial exaggeration]. Your attack strength and speed greatly increase and the point character will continuously recover health magically (which heals red health first). Your assists will also be powered up during X-Factor.
The attack strength, speed, and healing rate all depend on how strong the X-Factor is when activated. It consists of 3 levels; 1st level when you still have all 3 characters, and 3rd level when you are down to your last character.
X-Factor can be used to cancel just about anything and can be activated anytime, this is called X-Factor Cancelling (aka XFC or KFC). People use it strategically to save their butts if they screwed up a hyper combo, or if they want to extend their hyper combos by KFCing and performing another hyper combo.
X-Factor can only be used once per match.
Trivia: Reason why some people call it KFC is because the letter K looks like the letter X, and it is easier to pronounce KFC then XFC....
It's like Makoto's Tanden Kitauki Semu no Kata