Real world example: imagine you have a single-axis motion stage driven by electric motor and you want to control position of a carriage. Usually your control output is motor voltage. Motor voltage approximately translates to current through motor windings, which in turn approximately translates to torque exerted by motor. Torque exerts a force (T = F * r) on carriage. Applying force to the carriage makes it accelerate (F = m * a). Acceleration linearly increases the carriage velocity (v = v0 + a * t). Carriage having some velocity finally causes the position change (s = v0 * t + a * t^2).
In the essence, the system turns out to be non-linear with the respect to parameter you are controlling.
To improve this system, one solution is to add velocity sensor (or differentiate the position sensor, if it's resolution is high enough) and introduce a cascading PID loop topology- the outer loop takes position error and outputs velocity error, which is fed to inner loop (input = velocity error, output = acceleration). The coefficients for the loops have to be tuned starting from innermost loop.
Another solution is to use different control algorithm which is suited for non-linear systems (e.g. LQR).