 A transformer is composed of two different coils of wire around opposite sides of an iron core. As you know, passing an alternating current through a coil of wire that surrounds a metal core induces a varying magnetic field in the core. This field will cause a responding current flow in a secondary coil wound around the opposite side.  What makes transformers so useful is that if you change the number of turns from one side to the other, you change the voltage in the wire on the right! Transformers can change a high voltage to a lower one, or a low voltage to a higher one. First let's look at a transformer that converts a low voltage to a high one. This is called a step-up transformer.  Using the numbers in the example above, you can see that the right side has four times more turns. As a result, the voltage on the right has increased four times (from 100 V to 400 V). The voltage has been stepped up by a factor of four. Because current is inversely proportional to voltage, you can see that stepping up the voltage pays a price ... the current on the right is only a quarter of what it was on the left. Step-up transformers increase the voltage, but decrease the current. In our example above, the current went from 10 A to 2.5 A, a reduction of by a factor of four. Interestingly, you can also see that the power supplied to the primary coil (1000 W) is equal to the power delivered to the secondary coil. This assumes there is no loss of power due to heat (which of course is the ideal case ... generally not true in real life). Now let's look at a transformer which reduces the voltage. This is called a step-down transformer.  Using the numbers in the example above, you can see that the right side has one fifth the number of turns. As a result, the voltage on the right is only one-fifth as large. The voltage has been stepped down by a factor of five (1000 V down to 200 V). Because current is inversely proportional to voltage, you can see that stepping down the voltage gives a bonus ... the current on the right is five times what it was on the left. Step-down transformers decrease the voltage, but increase the current. In our example above, the current went from 2 A to 10 A, an increase by a factor of five. There are other factors which can affect how a transformer operates, such as the number of turns used altogether, the size and type of wire, and the type of metal used for the core. This allows for transformers which can work with very tiny or very large voltages. 
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