System engineering deals not only with how to develop an IT system technically, but also how to plan the process, get information from customers, test, make offers and payment, implementation and roll-out and maintenance in cooperation with customers/users.
Iteration means repetition. When you start the development of an IT solution, you first have some initial planning. Then you go into the cycle, plan, analyse, implement (program/develop), test, evaluate (and correct errors), do further planning, further analysis and go on, until you are satisfied and deploy the system - which means lets customers use it.
Read more about the waterfall method here: https://airbrake.io/blog/sdlc/waterfall-model