A physical system is a portion of the universe that is chosen for physical analysis. All components of the system must coexist and have some physical relationship among themselves. The boundaries of the system are fundamentally arbitrary and often chosen to make the analysis easier or clearer. Everything outside the system is typically called the (external) environment.
A system is said to be isolated if it does not interact with the environment, or the interaction is so small it can be neglected. Generally, a system is isolated if it is distant from all other sources of interaction, but it may have different meanings in different situations. In thermodynamics, for instance, a system is said to be isolated if it is enclosed by immovable walls that do not permit any exchange of energy or mass. In fact, energy is constant in an isolated system.