Let's begin our story with the little known fact that every day on this wonderful little planet of ours, there is electricity in the air, a lot more than you might think in fact. From sea level to about 5 kilometers up there is a voltage difference of about 100 volts per meter. That means that between your head and your feet, you've got about 200 volts of potential difference. So the first question we need to answer is, why aren't we being electrocuted? Well, as a kid, did you ever touch your fingers to the leads of an ohm meter and discover that you have about 1000 ohms in your body? It turns out that we humans are really pretty good conductors, not as good as copper mind you, but a lot better than air. So we are really in pretty good electrical contact with the ground that we are walking on, which means the voltage at our head is basically the same as the voltage at our feet. V = I x R, and since the R of our body is small, and apparently the current I, flowing through our body is small, since we are still here, so V, the voltage difference between our head and our feet is the product of two small numbers, and is hence very small. On the other hand, the resistance, R of air is very high. So the fact that there is a large (a hundred volts) difference between our head and the air nearby still leads to very very small currents flowing between our head and the atmosphere, and we survive. Now keep this in mind as we get into the electricity business.
Okay, you've just been appointed president of WEE, Worldwide Electrical Enterprises, and your mission is to bring electricity to the world. No problem, you say, I'll just build myself a giant nuclear power plant, and string a couple of wires from here to your house. Things are going great, but occasionally you get complaints from your customers. They tell you that this electricity stuff is great, except that quite often their appliances stop working. That isn't so bad, but what really bugs them is that sometimes they are walking by one of those electrical outlets you installed, and all of a sudden a giant spark leaps out at them and knocks them silly. Sales at WEE are down, way down, and something has to be done. What is going one here? You know for a fact that the voltage between the two wires you installed is 110 volts. All you have to do is stick a voltmeter into the plugs and you'll see, 110 volts, plain and simple. But that isn't the only circuit in the picture. You see, there is also the circuit you are establishing between either of your pair of wires, and the ground that your customer is standing on. Depending on electrical conditions in the atmosphere, this could range from a few hundred volts, to a few hundred thousand volts, especially when one of those pesky lightning bolts happens to hit your wires. What's the solution?
Well, engineering says it's simple. You need to make sure that one of the holes in the plug you bring into the home is at the same voltage as the person in the home, and that the other one stays 110 volts higher. The easy way to do this is to run one of the wires from your power plant to the guys home, and also connect it every few hundred feet to the ground beneath our feet. Then your guarantee that the voltage difference between that wire and the ground your customer walks on is very small. You send maintenence out to drive a few million metals stakes deep into the ground, and connect them up to your newly named "ground wire," and guess, what, sales skyrocket. Not only are those eight foot long sparks a thing of the past, but now when lightning strikes your wires it is quickly routed to the ground beneath the power poles and profits are up, way up.
Needless to say, you are dismayed when R. U. Sparky from the Consumer Products Safety Board calls you to tell you that now the kids who used to stick their fingers into your outlets and get a finger snapping jolt are now showing up in emergency rooms everywhere suffering from cardiac arrest. You see, before, with your two wire circuit, when a kid stuck two of his fingers into your outlets, a pretty hefty current would flow between the fingers, leading to a nasty zap and a couple of burn marks on the fingers, but now, it only takes one finger, and the current is flowing from the finger in the outlet to the feet on the floor, and passing through the heart on the way. Sales are down, way down.
This time marketing saves the day. They go out with massive public education campaign, telling everyone that electricity is not a toy, and kids need to keep their fingers out of the outlets. You now discover one of the dark secrets of capitalism. Many of the manufacturers of electrical appliances have intentionally connected the metal cases of their products to one of the power wires. Unbelievable, but true. After all, they can save a few pennies on wiring by letting the metal box their refrigerator is built in act as one of the wires. This worked great for your two wire system, and it works okay now as long as the wire that is connected to the metal case is the ground wire, but unfortunately, half the time the people plug the cord in the other way, and you've got 110 connected to the case. People are dropping like flies as soon as they touch their washing machine or refrigerator. Sales are down, way down.
Engineering to the rescue again. Instead of having those beautiful symmetric plugs in every house, we'll sacrifice esthetics for practicality, and make one hole larger than the other. We'll then make sure that all of manufacturers connect the larger wire to ground and to their cases, and since customers can only plug their appliances in one way, they are guaranteed that the case will be at the same voltage level as the ground, not at 110. The mortality rate is way down now. The only problem is that people make mistakes. Sloppy electricians sometimes wire the outlets up backwards, or homeowners, using the motto "Why let someone else do it when you can do it for twice as much yourself?" decide to wire up a house and make a mess of it. "You just can't count on it." mutters C. I. Toldu, the VP of marketing. "Call up engineering and see if they can come up with something else."
"If you need to protect yourself from stupidity, you need an extra wire." says B. A. Weenee, son in law of the founder of WEE. Here's the plan. Add another ground wire to all of the plugs, and force all of the manufacturers to connect this wire to the case of their appliances. We'll make this wire very different from the others, so even stupid homeowners will wire it up right. Now if those dumb electricians accidently swap the hot and ground wires, or if that washing machine wire comes loose and touches the case, we'll have a short circuit to ground, and the breaker will flip. Even if you decide to drill an extra hole in your bathtub to make it drain faster, while it is full of water and you are sitting in, you will emerge unscathed, for the current will run from the hot wire to the grounded case and flip the breaker, before really giving you a jumping jolt. Sales are up, way up, and we are now in the age of three prong electric outlets.
Things are great until you get an email from the law for of Lye, Cheetem, and Steele, informing you that you are being sued for millions of dollars because their client, Issah Fewl, was drying her hair with one of those cheap plastic hair dryers while soaking in her bubble bath, and managed to drop the hair dryer in the water. You see the dryer was defective but there wasn't enough current being generated to trip the breaker, just enough to fry the client. Let's call Frye M. Upp in engineering and see if they can figure a way out of this one. Frye comes up with this idea: we can add some circuitry to the plug, that can make sure that all the current that is flowing into one wire is also flowing out of the other wire. That way, if a human ever becomes part of the circuit, some of the current will be missing, and we can interrupt the circuit right away and save their life. I'll call this idea the Ground Fault Interrupter, or GFI for short. These type of plugs are required today in bathrooms and kitchens in the US, and prevent even idiots like Issah Fewl from harming themselves with electricity. You are much more likely to be struck by lightning in an open field than you are to be electrocuted in your home, thanks to the efforts of wonderful organizations like WEE.
So now our story is complete. I need to acknowledge my sources for this article, name Volume 2 of Feynman's Lectures on Physics and most importantly, Bill Beaty, who wrote a great article called Why Ground on his web-site.