A transformer uses mutual induction to step voltage up or down. Two coils on a common iron core: $V_s/V_p = N_s/N_p$ (turns ratio). Ideal transformer: $V_p I_p = V_s I_s$ (power conservation). Step-up ($N_s > N_p$): increases voltage, decreases current. Step-down ($N_s < N_p$): decreases voltage, increases current. Energy losses: (1) copper losses ($I^2R$ in windings), (2) eddy current losses (reduced by lamination), (3) hysteresis losses (core repeatedly magnetized), (4) flux leakage. Transformers work only with AC (need changing flux).