Reactive power is one of the more difficult concepts to explain, and engineers are generally poor at explaining even simple things. But I will try...
Starting with DC circuits, we know that power (P) is equal to the voltage (V) times the current (I). The nice thing about DC is that the magnitudes of the voltage and current are constant (i.e. NOT a function of time); the power delivered at every instant in time is the same.
AC circuits are different because both voltage and current vary as a function of time. (Ideally) both are 60 Hz sinusoids. The power being delivered at any point in time is equal to the voltage at that time multiplied by the current at that time. In AC, the power delivered is not constant; it varys as a function of time. If you do the math (assume for now that both sinusoids are in phase), you'll see that the power delivered is an offset (i.e. not centered around zero) 60 Hz sinusoid. Delivered power is at a maximum when the voltage and current waves simultaneously reach their peaks and zero then both are zero.
We routinely overlook these fluctuations in delivered power because we're really only interested in the average power delivered (over any integer number of complete cycles). The average is clearly a function of the voltage and current peak magnitudes, but what we'd really like is a measure for the size of these sinusoids that give us the average power when multiplied together. It turns out that you can arrive at this desireable measure of magnitude by taking the square root of the mean of the square of the wave -- much more commonly called RMS (for root-mean-square). It's nearly always true that any AC magnitudes you are ever given will be RMS values. So, for AC: V(rms)*I(rms)=P(ave).
No reactive power so far...
But we've simplified our discussion to this point by assuming that the voltage and current sinusoids are in phase with each other. This is most often not true because the very nature of AC brings the capacitive and inductive natures of electrical lines and loads into play. Most often current lags voltage because lines, transformers, and motors all tend to have an inductive nature.
Let's consider an interesting special case, where the current lags behind the voltage by 90 degress. If you do the math (again), you will see that the power sinusoid is now centered around zero. What this means is that over each cycle, the average power delivered is zero! This situation (i.e. 90 degree lag) only occurs when the "load" is a pure inductor. You'll get the same zero average power result when current leads voltage by 90 degrees, which only happens when your "load" is a pure capacitor.
You can do more math to see how the magnitude of the power sinusoid stays constant while the its centerline moves toward zero as the angle between voltage and current (called the phase angle) increases (up to 90 degrees).
So, obviously V(rms)*I(rms)=P(ave) does not work so well. It needs to take phase angle into account. You can verify (with more math) that P(ave)=V(rms)*I(rms)*cosine(phase angle). The cosine of the phase angle is also called the "power factor".
We could be finished... but we engineers are not completely comfortable. We attach our metering devices and measure the voltage and the current, and we see that the so-called "apparant" power (A) is usually greater than what the load is actually consuming. If "real" power isn't being delivered, then what is? Well, we engineers started talking about "reactive" power (R) -- sometimes I wonder if it was just to confuse everyone else.
Reactive power R(ave)=V(rms)*I(rms)*sine(phase angle), which means that P(ave) and R(ave) form the legs of a right triangle with a hypotenuse of A (P^2+R^2=A^2).
The amount of reactive power compared against the real power gives you information about the phase angle between voltage and current.
So, to answer your questions...
Yes, reactive power is related to the energy stored and returned by capacitive and reactive devices through every cycle (and netting to zero). It is not "consumed" and does not (directly) increase real power losses (although reactine power increases the magnitude of currents to deliver the same real power and therefore increase RI^2 losses). Reactive power is an unavoidable characteristic of an AC power system, but utilities design their systems to minimize reactive power flows because it doing so reduces losses and voltage drops. For reasons described above, the "apparant" power is the maximum possible value for either real or reactive power. Unless the phase angle is zero or +/-90 degrees, both real and reactive power will be less than "apparant" power.
Hope this helps... If not take two of these ( :beer: ) and read again.