What effect do var's have on the power factor of the circuit?

VAr is reactive power, caused by either inductive or capacitive loads. The ideal power factor to have is 1, anything less than that is a loss on the network. The effect of VArs on the circuit though depends. If you have a load that is mainly inductive, then adding more inductive reactance will lower the power factor. However, if you introduce capacitive reactance this will increase the power factor, and the opposite is true if its a mainly capacitive circuit. So VArs will either increase or decrease the power factor depending on the load of the circuit. The ideal situation is to balance inductive reactance with capacitive reactance so they in effect cancel each other out and power factor is 1.