The low frequency array (LOFAR) is a large distributed radio telescope, consisting of phased array antenna stations that are combined in an aperture synthesis array. Antenna stations consist of many simple, omnidirectional antennas. Flexible station-based signal processing allows for trading bandwidth against instantaneous sky coverage. Central processing implements a software correlator, which can be reconfigured as a full tied array beamformer, and online calibration functions to handle the large data streams produced by the system. The key science programs for LOFAR challenge the technical specifications in several directions, which resulted in a highly reconfigurable architecture. This paper describes the LOFAR system design, the configuration, and the signal-processing chain. LOFAR has been developed by ASTRON and a consortium of universities and industrial partners. The instrument is currently being deployed in The Netherlands. Additional stations are being built in several other European countries. The telescope is considered an important pathfinder for the square kilometer array (SKA) in demonstrating the potential of (sparse) aperture arrays, in developing solutions to major calibration issues that are directly applicable to the SKA, and in paving the way for the mass-production and operations of such large distributed radio telescope systems.