A quick and dirty answer is:
The "Neutral" [Better known as the Grounded Circuit Conductor] is no different than any other circuit conductor - only it is usually Grounded.
On a simple 1 phase 3 wire system, the "Neutral" is derived from a "Center Tap" on the secondary winding.
This center tap effectively cuts the winding's normal output voltage of 240 VAC by half, so from each "End" of the secondary winding to the Center Tap, the Voltage is 120 VAC.
It does not need to be Grounded for this to function properly - nor any other "Common Grounded Circuit Conductor".
If you have further questions, I would suggest starting a thread in the Theory area.
Also take a look at some of the Transformer schematics in the Technical Reference area, as they will help explain things better.
Scott SET
