A system that can exchange both energy and matter with its surroundings is called an open system. Its boundary permits mass transfer as well as energy transfer through heat, work, radiation, or the movement of matter.
A flowing pipe, a steam turbine, and a living organism are useful examples. In an engineering analysis, material can enter through an inlet and leave through an outlet, carrying energy with it. The first law of thermodynamics for such a control volume therefore includes not only heat and work but also the energy transported by the flowing mass.
The key distinction is between the system boundary and the material inside it. An open system can still be studied carefully even though its contents change continuously. A closed system may exchange energy but not matter, while an isolated system exchanges neither matter nor energy. “Adiabatic” is a different term: it means that no heat crosses the boundary, but it does not automatically mean that matter or other forms of energy cannot cross. The classifications describe permitted exchanges, not whether the system is in equilibrium.