Mutual inductance in induction motors occurs when the stator windings, excited by three-phase currents, create a rotating magnetic field that induces current in the rotor. This induced current generates its own magnetic field, which interacts with the stator's field, causing the rotor to attempt alignment like bar magnets. The phase currents in the stator windings vary sinusoidally, altering the magnetic field strength and polarity over time. As each winding reaches its maximum current, the rotor shifts to align with it, continuously adjusting to the changing magnetic fields. This dynamic interaction is essential for the operation of induction motors.