Mode of political organization that unites separate states or other polities within an overarching political system in such a way as to allow each to maintain its own fundamental political integrity. Federal systems do this by requiring that basic policies be made and implemented through negotiation in some form.
The basic idea behind federalism can be very simply stated. It is that relations between states should be conducted under the rule of law. Conflict and disagreement should be resolved through peaceful means rather than through coercion or war.
The most important aspect of a federal system is that it recognises that there are different types of political issue which need different types of institution to deal with them. Some affect only a local area, others are more widespread in their scope. The institutions of government should reflect this. The idea that government should be based solely on strong central institutions is old-fashioned and out-of-date.
In a federal system, the power to deal with an issue is held by institutions at a level as low as possible, and only as high as necessary. This is the famous principle of subsidiarity.
The second major feature of a federal system is that it is democratic. Each level of government has its own direct relationship with the citizens. Its laws apply directly to the citizens and not solely to the constituent states.
In a federal system, power is dispersed but coordinated. For this reason, federalism is often seen as a means of protecting pluralism and the rights of the individual against an over-powerful government.