what is the difference between two and three prong outlets/plugs?
The third prong is a ground plug. That way, if the device you're using shorts out, the current will flow through the third prong to ground instead of flowing through you to ground.
It also furnishes a "polarized" connection of whatever device to the "hot" and neutral leads from the power source --- it's considered good form to have switches, fuses, and other interrupting controls in the hot line --- 2 prong plugs leave you a 50:50 chance of misconnecting the device, not that it won't work, but under adverse circumstances, you'd rather the fuse be on the hot line. You'll also find 2 prong plugs with wide and narrow blades to "fix" a preferred orientation for insertion in sockets, the wide blade being neutral and the narrow hot --- quite a few outlet plate covers demonstrate evidence of the wide blade being forced into the narrow "hot" side --- and some occasional indications of even more exciting results, such as scorch marks, spatter from molten metal.
Check the NEMA standards for further details.
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