The encomienda system (in theory) was a feudal-like system where Spaniards would offer protection and education to the native populations in exchange for labor and money/gifts.
In reality, the encomienda system was a horrible abuse of power and essentially slavery. It was beneficial to the Spanish because they were able to extract labor at no cost. Additionally, it enabled the Peninsulares (European-born Spaniards) and Creoles (American-born Spaniards) to maintain power and privileges at the top of the social pyramid. However, the encomienda system was not helpful to Spanish landowners who wanted to use the encomienda system to its original purpose; it ended up favoring those peninsulares and creoles who were skilled at enslaving and torturing native populations.
For the native Amerindians, there were very little positives. Negatives include abuse, forced labor, and punishment. In some situations, when there was a small crop harvest, the farmers were forced to starve themselves in order to send food to the landowners. In addition, and this applies moreso to Peru, native Americans were forced to work in gold and silver mines, where conditions were so bad that most workers died.
The encomienda system was later reformed after men such as Bartolome de las Casas informed the crown that if conditions continued under the encomienda system, the entire population would be at risk and the souls of all those involved could potentially be damned (keep in mind that colonial Spanish America was a site for Catholic missionaries). The new system was relabeled the repartamiento, which also had its flaws.