Can system restore remove virus from the computer?

The short answer is no.

System Restore can help spread a virus though.

See here for more info: Removing Viruses with System Restore. Quoting the relevant parts:

When System Restore first appeared in the market, computer manufacturers and other companies claimed ... that it could remove viruses and fix other problems with the computer.

In reality, System Restore can create copies of the infected files. And some viruses may be capable of infecting the restore volume as well as the actual system files. When a person cleans their computer using an anti-virus, then uses System Restore, they may inadvertently re-infect the computer. Or if they use System Restore as a means of removal, either the restore will fail (if the anti-virus cleans the virus out during the restore process) or the restore will replace the file with an infected version.

No.

In fact, to make sure that no virus is still residing on your computer you should first delete all system restore points and do a manual cleaning of the virus or let your antivirus software handle it if it can.

The only sure-fire way to remove a virus is to re-install the operating system.

Once you're infected you never know if you are still infected. Virus scanners are always updating their list of threats they can detect, but virus authors are updating their threats just as fast. There are always threats out there that are not (yet) able to be detected.

Good virus authors will infect every piece of the system needed to stay alive. You can never be sure how thorough the virus author is. The best will include cutting edge rootkits, which, in a real-world case, could include infecting your BIOS (although I've never seen that in theory, not in the real world).

YES system restore CAN INDEED get rid of a virus. But (OBVIOUSLY) you have to pick a point prior to which the infection occurred!

I had the "services.freshy.com" (browser hijacker) and tried a variety of things, used various spyware removers, but nothing worked. Of course there was one on-line tech help that was eager to take my $65 for a removal service.... almost fell for that, figured in the worst case I would re-install the entire OS (Windows 7, btw). Then I remembered the system restore point. Tried it, and.... BINGO! It worked! Now I'll go back and try to remove any restore points that were created when the malware was active.

So yes, if you're going to re-install anyway, try this. What harm can it do? None. It might just save your day.