This lecture discusses the concepts of control volume and system in fluid dynamics, emphasizing the differences between Lagrangian and Eulerian perspectives. The instructor explains that a system is a collection of matter with fixed identity, which moves with the flow, while a control volume is a fixed space through which fluid can flow. The lecture highlights the importance of mass conservation, Newton's second law, and energy conservation as fundamental physical laws that apply to Lagrangian systems. The instructor introduces the Reynolds transport theorem as a crucial tool for converting these laws from a Lagrangian description to an Eulerian control volume framework. The lecture includes intuitive explanations and examples to clarify these concepts, culminating in a discussion of how the Reynolds transport theorem can be applied to solve complex engineering flow problems. The instructor emphasizes the significance of these principles in understanding fluid behavior in various applications, such as turbines and jet engines.