Well let's start with the basics...
DC stands for direct current. It is current that starts at one place and flows in one direction to the end destination, hence the name Direct.
AC stands for Alternating Current. The current flows in one direction for a period of time and then switches direction, going the opposite way. It switches diretion over and over again continuously. In the United States the AC current in power lines goes switches direction, forward to backward, then backward to forward, 60 times each second. This is a frequency of 60 Hertz and is called 60Hz AC electricity.
Many electrical appliance, computers for example use DC current. Yet our power outlets supply AC current. The computer has a power supply that contains a step down AC to DC converter. The AC to DC part is self explanatory and the step down part means that the voltage is lowered from the 120 V coming into whatever the computer requires. You are right when you say that tranformers are used to change voltages in AC current, but your reasoning is incorrect. The transformer does not use AC electricity up in anyway. There is, ideally of course, no energy lost in a transformer. How a transformer actually changes the voltage of a current requires some knowledge of magnetic fields and a good understanding of what a voltage actually is. In my experience many people do not really understand voltage. That is a separate topic and I don't have room to get into it here. For more information I suggest the book Electricity Demystified, or if your really interested in voltages and magnetic fields(as you should be there are very interesting concepts!), then I suggest picking up an intro to physics text.
Anyway, you may be wondering why, when many devices use DC current, we produce AC current. This is because AC current is much easier to produce. AC generators can come in many different forms and be powered by many different things, wind, Nuclear, oil, hydro-power, etc. These generators use magnets in such a way that they produce AC current. This has to deal with magnetic fields and how magnetic fields can induce electric current. Again its kinda complicated to fit into the post, so I suggest a book on electricity or an intro to physics text.
Hope this helped!