An environment variable is an operating system variable that use the hosted application to set application parameters.
They can be set on different scopes:
See How to manage variable in dos? Environment variable
Example: listing of the environment variable of the Outlook process (application) within Process explorer
See process environment variable
%PATH% | list of directories where the OS search to find executable binary. See Os - (Search) Path Environment Variable |
%temp% | Temp Directory |
%SYSTEMDRIVE% | Disk Drive |