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To answer the question of what a GFCI actually does, it is helpful to break down the meaning of the acronym. GFCI stands for Ground Fault Circuit Interrupter.
A Ground Fault occurs when there is a break in the low-resistance grounding path from a tool or electrical system. For those at are not electrical savvy, this means that the electricity running through the circuit is taking an alternate and unintended path to ground, most typically through the user of the equipment, also known as being electrocuted.
A Circuit (in our case an Electrical Circuit) is a path in which electrons flow from a voltage or current source. In other terms, it is the path that the electricity takes.
An Interrupter is something that stops, or interrupts, something from happening. In this case, it is something that stops the flow of electricity through the circuit.
Now, putting these terms together, it is simple to understand what a GFCI does. When a 'Ground Fault' is detected, the 'Interrupter' stops the flow of electricity through the 'circuit'.
To demonstrate this using an example, we will consider a 'lazy river' (for those of you who do not know what a lazy river, it is a river setup in a loop which you float upon... lazily). During normal operation of the lazy river, water flows from the starting point, around the river, and the same amount of water arrives back at the start. However, suppose that a wall on one side of the river began to collapse, allowing water to escape and travel along an unintended path (possibly in the direction of the Tiki Bar close by ). Now, the amount of water returning to the start is less than the amount of water that left, triggering the 'interrupter' to stop the flow of water and hopefully protecting the Tiki Bar from being destroyed.
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