A transformer functions under the law of energy conservation, which states that energy can neither be created nor destroyed, only transformed. Therefore, a transformer does not make electricity, it merely changes the voltage to suit the needs of the user.
Transformers accomplish this change in voltage through the process of electromagnetic induction.
Electromagnetic Induction
When you run an alternating electric current through a wire (conductor), an invisible, moving magnetic field is created around the electrified conductor. When you place a second conductor within this changing magnetic field, the moving flux lines in the field induce a current in the second conductor.
You can use electromagnetic induction to increase or decrease voltage between the two conductors by wrapping the two conductors into coils with one being longer (having more loops in the coil), and the other shorter (having fewer loops in the coil). If you then electrify the coil having more loops, a current will be induced in the coil with fewer loops at a lower voltage than is present in the first coil.