There are two things to notice in the pictures at left and right:
1) On the right, there are two wires running out of the transformer and three wires running to the house. The two from the transformer are insulated, and the third one is bare. The bare wire is the ground wire. The two insulated wires each carry 120 volts, but they are 180 degrees out of phase so the difference between them is 240 volts.
On the left, there are three wires running out of the transformer that connect to pole-to-pole lines that serve other houses. Two insulted wires run to these homes as well, along with a ground wire. This arrangement allows a homeowner to use both 120-volt and 240-volt appliances.
2) There is a bare wire running down the pole in the picture at right. This is a grounding wire. It is in direct contact with the earth, running 6 to 10 feet underground.
Below: Cutaway of Pole Type Distribution Transformer
The transformer is wired in this sort of configuration:
The 120-240 volts enters your house through a typical watt-hour meter like this one:
All transformers have a ratio--the number of windings the high and low sides have. Let's say that the voltage on the high side of the power pole is 12,000 volts and the power coming from the pole transformer into your home is 120 volts. The ratio of the step down transformer would be 100 to 1. In other words for every 100 windings on the high side there is only one winding on the low side.
Step-up and step-down transformers
Every transformer for the most part can be used as a step-up or step- down transformer. That is why when the power goes out most electrical utilities want you to have a disconnect switch in place if you use a generator. That generator may be giving you 120 volts but if plugged into the pole transformer it can generate 12,000 volts on the high side and injure a utility worker.MGN (multi-grounded neutral): a single uninsulated grounded conductor. At many poles, the MGN is physically grounded to a groundrod at the base of the pole. (Science-HowStuffWorks, Ann's Graden, eHow, photos courtesy Neal McLain)