Overvoltage protection
Lightning, line surges or unintentional contact with higher voltage lines can cause dangerously high voltages to the electrical distribution system wires. Grounding provides an alternative path around the electrical system of your home or workplace minimizes damage from such occurances.Voltage stabilization
There are many sources of electricity. Every transformer can be considered a separate source. If there were not a common reference point for all these voltage sources it would be extremely difficult to calculate their relationships to each other. The earth is the most omnipresent conductive surface, and so it was adopted in the very beginnings of electrical deistirution systems as a nearly universal standard for all electric systems.Current path in order to facilitate the operation of overcurrent devices
This purpose of grounding is the most important one to understand. Grounding system provides certain level of safety to humans and property in case of equipment damages.Grounding operation in electrical distribution network
The main reason why grounding is used in electrical distribution network is the safety: when all metallic parts in electrical equipments are grounded then if the insulation inside the equipments fails there are no dangerous voltages present in the equipment case. Then the live wire touches the grounded case then the circuit is effectively shorted and fuse will immediatly blow. When the fuse is blown then the dangerous voltages are away.The safety is the primary function of grounding. Grounding systems are designed so that they do provide the necessary safety functions. Grounding also have other functions in some applications but the safety should not be compromised in any case. Grounding is quite often used to provide common ground reference potential for all equipments but the existing building grounding systems might not provide good enough ground potential for all equipments which might lead to ground potential difference and ground loop problems which are common problems in computer networks and audio/video systems.
How electric shock happens
The "hot" wire is at 120 volts or 230 volts (depends on the mains voltage used in your country) and the other wire is neutral or ground. If a person were to touch the neutral wire only, no shock would result simply because there is no voltage on it. If he were to touch the hot wire only, again nothing would happen to him unless some other part of his body were to become grounded. A person is considered to be grounded if he comes in contact with a water pipe, metal conduit, the neutral or ground wire, or stands barefoot on a concrete floor.In other words, neither wire is a shock hazard unless a person is grounded, and then only the hot is a potential shock hazard. Of course, if a person were to touch both wires at the same time, he would be shocked simply because his body is completing connection between "hot" and "ground" wires.
Metal case safety
Back in the early days, equipment and appliances fitted with the two wire power plug were readily accepted to be safe from shock hazard because the metal housing was not connected to either wire of the line cord (called floating case).One of the problems with appliances and equipment which have a "floating metal case" is that a shock hazard exists if the case comes into contact with the hot wire. This so called "fault condition" may happen in many ways with some of the more common causes being a "pinched" line cord, failure of installation systems, or movement of components due to shock or vibration which will cause the "hot wire" terminal to touch the case.
Naturally, if for any reason the case does become "live,"then a person touching it may be shocked if he is grounded. If this "hot chassis" is connected to another chassis or instrument by a typical shielded cord, then that chassis or instrument will become hot also. The entire purpose of the present three wire system is to provide a separate ground path which will effectively eliminate any possibility of shock.
If the live wire touches the grounde metal case the ground connection in the case causes that the situation becomes a showrt circuit as drawn in picture below.
