Multi-threading and parallel processing are two completely different topics, each worthy of its own conversation, but for the sake of introduction…
Threading:
When you launch an executable, it is running in a thread within a process. When you launch another thread, call it thread 2, you now have 2 separately running execution chains (threads) within the same process. On a single core microprocessor (uP), it is possible to run multiple threads, but not in parallel. Although conceptually the threads are often said to run at the same time, they are actually running consecutively in time slices allocated and controlled by the operating system. These slices are interleaved with each other. So, the execution steps of thread 1 do not actually happen at the same time as the execution steps of thread 2. These behaviors generally extend to as many threads as you create, i.e. packets of execution chains all working within the same process and sharing time slices doled out by the operating system.
So, in your system call example, it really depends on what the system call is as to whether or not it would finish before allowing the execution steps of the other thread to proceed. Several factors play into what will happen: Is it a blocking call? Does one thread have more priority than the other. What is the duration of the time slices?
Links relevant to threading in C:
SO Example
POSIX
ANSI C
Parallel Processing:
When multi-threaded program execution occurs on a multiple core system (multiple uP, or multiple multi-core uP) threads can run concurrently, or in parallel as different threads may be split off to separate cores to share the workload. This is one example of parallel processing.
Again, conceptually, parallel processing and threading are thought to be similar in that they allow things to be done simultaneously. But that is concept only, they are really very different, in both target application and technique. Where threading is useful as a way to identify and split out an entire task within a process (eg, a TCP/IP server may launch a worker thread when a new connection is requested, then connects, and maintains that connection as long as it remains), parallel processing is typically used to send smaller components of the same task (eg. a complex set of computations that can be performed independently in separate locations) off to separate resources (cores, or uPs) to be completed simultaneously. This is where multiple core processors really make a difference. But parallel processing also takes advantage of multiple systems, popular in areas such as genetics and MMORPG gaming.
Links relevant to parallel processing in C:
OpenMP
More OpenMP (examples)
Gribble Labs – Introduction to OpenMP
CUDA Tookit from NVIDIA
Additional reading on the general topic of threading and architecture:
This summary of threading and architecture barely scratches the surface. There are many parts to the the topic. Books to address them would fill a small library, and there are thousands of links. Not surprisingly within the broader topic some concepts do not seem to follow reason. For example, it is not a given that simply having more cores will result in faster multi-threaded programs.