Factor variables are a fundamental concept in statistics and data analysis, often referred to as categorical variables. These variables are distinct from numerical variables in that they have a limited and fixed set of possible values. Examples of factor variables include blood type, currency, and nationality.

Conversely, variables such as monthly income, height, and price are typically not considered categorical due to their unlimited range of potential values. However, even these can be converted into categorical variables, a process we will explore in later chapters.

Let's learn how to create a factor variable.

Recall from the previous section that a factor is a type of vector. To inform R that we are working with factor values, we employ the factor() function and pass the relevant vector of values as an argument.

Upon execution, not only is the vector of values outputted, but we also see a line titled Levels:, which indicates all the distinct (unique) values the factor can take.