The system clock is actually a crystal oscillator, which is a small piece of quartz crystal stored in a very small tin can. When electricity is connected to the quartz crystal it starts to vibrate. The size and shape of the crystal determine how fast it will vibrate.
One clock cycle or cycle is the smallest slice of time that a CPU can use at a time. An old 8088 CPU needed 12 cycles to complete an instruction. Compare this to a Pentium, which requires only 1 cycle to do that same instruction.
When comparing speeds of the same type of CPU, clock speed is an important factor. For example a 200MHz Pentium would be much faster than a 100MHz Pentium.