Without the capacitor in place, the magnetic field of the power source (i.e., generator, transformer, etc.) will be exchanging energy with the magnetic field of the inductive load. That is the ?reactive power? portion of the total energy of the system.
After you put the capacitor in place, presuming it is sized correctly, the magnetic field of the inductive load will be exchanging energy with the electric field of the capacitor. That energy exchange takes place only within the two components, and the current flow begins and ends at the points at which the two are connected. The upstream power source does not see this energy exchange, nor the current flow between the two components. That is why the overall power level, as seen by the source, goes down. That is what is gained, by using capacitors in the first place.
But for this to work, the capacitor has be in parallel with the inductive load (whether or not there is also a resistive component in series with the inductive load). The current flowing in a capacitor is proportional to the rate of change of the voltage imposed across it. That is what makes the capacitor?s current be out of phase with the inductor?s current, and that in turn is what allows the energy exchange between the two components. If the capacitor were in series with the inductor, the two could not exchange energy, and you would not get a power factor correction. Instead, the power source would see the capacitor as just another load.