X-Factor was the brainchild of Angel and Cameron Hodge as a means of using anti-mutant sentiment for the benefit of mutantkind. The original X-Factor organization posed as mutant hunters, employing a PR campaign to encourage people who suspected mutant activity to call in and request their services. If the reported mutant was an innocent unable to control their powers or being falsely targeted, X-Factor "captured" the mutant and then trained them in secret at their Manhattan headquarters to control their abilities and live among humans. If the mutant was a genuine threat, X-Factor maintained a second set of identities as "mutant freedom fighters" called the X-Terminators who could step in and stop the mutant threat more directly.
After their ruse was uncovered (and their PR expert Hodge outted as a genuine anti-mutant activist), the original X-Factor became the first public mutant super-heroes. Unlike the X-Men, who operated as a covert strike force, X-Factor had a known headquarters in Manhattan, working with the police and authorities, and acting as local celebrities among New York's population.
The original X-Factor eventually disbanded as they were absorbed back into the X-Men.