A transformer is based on the fact that when an AC current flows through a wire, it generates a magnetic field commonly known as a "magnetic flux" all around it. The strength of this magnetic field is directly related to the size of the electric current and is known as the magnetic flux density. So the bigger the current the greater the magnetic flux density.

Now if another wire comes close to a wire with an AC current flowing through it , it to will experience an electric current flowing through it.

So if we put a second coil of wire next to the first one, and send a fluctuating electric current into the first coil, we will create an electric current and voltage in the second wire.

The current in the first coil is usually called the primary current and the current in the second wire is known as the secondary current.

In actual fact what happens is an electric current is passed through empty space from one coil, the primary coil, of wire to another, the secondary coil. This is called electromagnetic induction because the current in the first coil induces a current in the second coil.

We can induce a current more efficiently by using an iron core as shown on the right.

The coils of wire in a transformer are very important and determine how the transformer will function. If the second coil has the same number of turns as the first coil, the electric current in the second coil will be virtually the same size as the one in the first coil. However if we have more or fewer turns in the second coil, we can make the secondary current and voltage bigger or smaller than the primary current and voltage.

One important thing to note is that this works only if the electric current is fluctuating in some way. In other words, you have to use a type of constantly reversing electricity called alternating current (AC) with a transformer. Transformers do not work with direct current (DC), where the current constantly flows in the same direction.

If the primary coil has more turns that the secondary coil, the secondary voltage is smaller than the primary voltage, this is known as a step-down transformer. If the secondary coil has half as many turns, for example, as the first coil, the secondary voltage will be half the size of the primary voltage; if the secondary coil has one tenth as many turns, then it has one tenth the primary voltage.