Federalism is the system in which the power to govern is shared between the different levels of government. Basically, there are at least two different levels of government in an established territory, and these different levels govern through power granted to them in a constitution. The central government is the highest of these levels and, despite the many different forms of federal governments worldwide, they're almost always responsible for two things; national security and diplomacy. Okay, now how does it apply to the USA? Glad you asked.