This system sets all the requirements (rules / standards) for how financial institutions process cheques and a few other paper based payment instruments.
If you hand over a cheque to a person/business, and they use a different bank/financial institution to you, the two financial institutions have to 'talk' to each other in order to pass the relevant information to each other regarding that cheque (interchange). The money also needs to be passed from one financial institution to the other (settlement).
PCS's rules and standards set out how this actually happens in practice.
This includes components like: