When you insert a plug into an outlet in your house, you connect directly to the plant that generates the electricity you use, via a line transformer and a panel. It only takes two pins to do this. The third pin on some plugs grounds the circuit and prevents shocks and fires.
Two-Pin Plugs
The alternating current provided by the power company passes between two live, or "hot", wires in the panel, with a total of 240 volts between them. When an electrician wires a receptacle, he does it with one of these hot wires and a neutral wire that returns to the transformer to complete the circuit. This creates a 120-volt circuit. When you insert a two-pin plug, one pin connects to the hot wire and one connects to the neutral to extend the circuit through the wire to which the plug is attached.
Adding a Third Pin
During the installation of an electrical system, the electrician grounds the panel with a metal rod or some other means that provides a pathway for electricity to disperse into the earth. He connects each electrical device on the circuit, including all receptacles, to this ground path with a separate wire. Proper grounding prevents the build-up of charge on poorly insulated devices that can cause shocks and start fires. The third pin on a plug connects the plug to this ground path.