Loose wire inside may touch the chassis. This is why metal chassis appliances should have a third (ground) prong on the power plug. The ground circuit connects the chassis to the ground, so that the electricity goes through metal (wires) to reach the ground, instead of going through you (to reach the ground).
pretty simple, the insulation on the hot wire gets damaged (or doesnt exist) and allows it to touch the metal chassis. now the entire chassis is hooked up to wall power and touching it is equivalent to sticking a knife in an outlet.
This is what the ground pin is to prevent. you take the chassis and intentionally connect it to the ground pin, then you ground the ground circuit. Now if the hot wire does this, it shorts to ground and trips the breaker/fuse instead of killing someone
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