Why a capacitor improves the power factor and connecting reactor in parallel avoids increase of voltage
Power factor comes from the phase shift caused by if a load is "capacitive" or "inductive". 


Inductive loads cause the current to lag the voltage, and Capacitive loads cause the voltage to lag the current. Power factor is 1 when these are both in phase.

So with an inductive load such as a motor, the only way to skew the power factor back towards 1 is to use a capacitive load to cancel out the shift. 

On the flip side, a capacitive load needs some inductance to shift it back towards 1.


When you have a capacitor an inductor in series, depending on the frequency you can reach a "resonance" point, where the voltage across the capacitor will increase to much higher than the mains voltage due to its interaction with the inductor, as the capacitor will fail if the voltage gets too high you want to avoid this. combine this with the fact most AC capacitors will lose capacitance as they age means its not always easy to just calculate the values to avoid that. 


Due to this, it is more common to have the loads in parallel, equally it means the load your correcting can run at full line voltage.