A) Transformer works on the principle of mutual induction of two coils. When current in the primary coil is changed the flux linked to the secondary coil also changes. Consequently an EMF is induced in the secondary coil.
B) The construction of a transformer includes a ferromagnetic core around which multiple coils, or winding, of wire are wrapped. The input line connects to the 'primary' coil, while the output lines connect to 'secondary' coils. The alternating current in the primary coil induces an alternating magnetic flux that 'flows' around the ferromagnetic core, changing direction during each electrical cycle. The alternating flux in the core in turn induces an alternating current in each of the secondary coils. The voltage at each of the secondary coils is directly related to the primary voltage by the turns ratio, or the number of turns in the primary coil divided by the number turns in the secondary coil.
C) There are many ways that a transformer can lose energy:
1) Power losses occur because the changing magnetic field will also induce currents in the iron core. These induced currents are known as eddy currents. Eddy currents will generate heat and reduce the transformer's efficiency. In order to reduce the formation of eddy currents, a laminated core is used.
2) Current flowing through the primary and secondary coils will generate heat. Low resistance copper wires is used to reduce this effect.
3) The core is magnetized and demagnetized alternately when AC current flows through the primary coil. Energy is lost during this process. This is known as Hysteresis. This effect is reduced by using a soft iron core.
4) There may be a leakage of magnetic flux in the primary coil. A special core design is used in a transformer to ensure that all the primary flux is linked with the secondary coil.