Transformers and Long-Distance Power Transmission

Transformers are devices which use mutual induction to change the voltage and current of an AC circuit.

A transformer with primary coil of Np turns and secondary coil of Ns turns will have ratios of voltage and current

                 Vs         Ns         Ip
                ----   =   ----   =   ----
                 Vp         Np         Is

Jargon:

           Ns > Np               step-up transformer
           Ns < Np               step-down transformer

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Let's look very briefly at the steps involved in bringing electricity from a generating station to your home. For the full story, read How Power Distribution Grids Work, in the references below.

Create the electricity: different generators produce different voltages, but a very rough typical value might be 1,000 volts.
Increase voltage via a step-up transformer at an electrical station near the power plant, up to maybe 500,000 volts.
Send electricity long distance over high-voltage transmission lines.
Decrease voltage at a local substation via a step-down transformer to perhaps 3,000 volts .
Send electricity a few miles via "telephone poles" (or underground cables.
Divert some electricity to an individual building, decreasing the voltage to 240 volts with another step-down transformer.
When it first enters the building, run electricity through a fuse-box or set of circuit breakers. Most of the wiring inside the house is arranged so that it makes use of only 120 volts (read the full article below to see how).
Provide good ol' 120-volt electricity via standard outlets.

For more information

How Power Distribution Grids Work , from the How Stuff Works site, shows all the steps between creating electricity at a power station, and using the electricity in your home. Thanks to Marshall Brian for writing such a nice document!