A Federal Government of a country (which adopts this system) administers power at the Centre while the constituent governments will have their own legislative, executive and judicial powers limited to its own boundaries or states.
Some thing which is legal in CA may be illegal in FL. However, a Federal Offence is illegal in every constitutional state. If there is a federal offence involved the FBI will step in to assist the local Police & the Judicial investigations.
Local sales tax, excise duties are usually set by the State Government while, import duties, quotas, monetary and fiscal policies are set by the Central Government.
In times of major calamity, such as Hurricane Disasters etc. the relief funding / resources from the Federal Government will supplement the relief provided by the individual State Government.
In some hybrid variations, the Federal Government will retain certain important powers while others are devolved to the constituents states.
This subject is vast. It is recommended that you do a quick run through a couple of constitutions from those countries that adopt a Federal System of Governance. India would be an ideal place to start with. Good Luck!
A federal government refers to a constitutional republic of fifty states, one district which make up the United States. It comprises of three branches that is legislative, executive and judiciary. The branches are responsible for different powers. Visit http://en.wikipedia.org/wiki/Federal_government_of_the_United_States for more information.