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Scenario:

When a current flows through a wire, a magnetic field is produced around the wire. For a single piece of wire, the magnetic field consists of concentric circles around the center. However, if you wind the wire, the magnetic field acts much like a standard bar magnet. The wire is usually wrapped around an iron cylinder, which increases the resistance of the electromagnet.

The advantage of electromagnets is that they can be deactivated. As soon as no current flows in the wire, there is no longer a magnetic field. This makes them handy for picking up heavy cars from a junkyard and being able to let them go.

Just like a current can create a magnetic field. A magnet can create a current. This process is called electromagnetic induction. It works when a changing magnetic field produces a potential difference across a conductor, such as a wire. To do this, you have to move a wire through a magnetic field back and forth repeatedly. When you move it one way, it produces a potential difference, which is positive, and when you move it back, the pd is negative. This keeps alternating constantly, which is how you produce alternating current.

This is how generators work, except they bypass the back and forth motion of the wire by placing a magnet in the middle of a spool of wire that can rotate. As the magnet rotates, its polarity will change every half-turn, causing the PD through the wire to alternate every half-turn and produce alternating current to power our homes.

The references:
1. http://www.bbc.co.uk/education/subjects/zrkw2hv
2. AQA CGP GCSE Physics revision guide.

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