The isolation tranformer isolates the Transmission from distribution.
The neutral of the tranformer can be adjusted (connected) to earth potential, which is not possible without it.
Best source is Wiki (of course not the exhaustive), but our members seem not to have much confidence on it/ net searches
WIKI ENTRY
An isolation transformer is a transformer, often with symmetrical windings, which is used to decouple two circuits. An isolation transformer allows an AC signal or power to be taken from one device and fed into another without electrically connecting the two circuits. Isolation transformers block transmission of DC signals from one circuit to the other, but allow AC signals to pass. They also block interference caused by ground loops. Isolation transformers with electrostatic shields are used for power supplies for sensitive equipment such as computers or laboratory instruments.
In electronics testing, troubleshooting and servicing, an isolation transformer is a 1:1 power transformer which is used as a safety precaution. Since the neutral wire of an outlet is directly connected to ground, grounded objects near the device under test (desk, lamp, concrete floor, oscilloscope ground lead, etc.) may be at a hazardous potential difference with respect to that device. By using an isolation transformer, the bonding is eliminated, and the shock hazard is entirely contained within the device.
Isolation transformer are also used for the power supply of devices not on ground potential. A well-known example is the Austin transformer for the power supply of air-traffic obstacle lamps on mast radiators insulated against ground.
Isolation transformers are commonly designed with careful attention to capacitive coupling between the two windings. This is necessary because excessive capacitance could also couple AC current from the primary to the secondary. A grounded shield is commonly interposed between the primary and the secondary. This greatly reduces the coupling of common-mode noise present on supply conductors.
Differential noise can magnetically couple from the primary to the secondary of an isolation transformer. This requires other measures, such as a filter, to block differential noise from the secondary of an isolation transformer.
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