The current-balance test
Inside every GFCI the hot and neutral conductors pass through the same small sensing coil. When the circuit is healthy, the current going out and the current coming back are equal and opposite, their magnetic fields cancel, and the coil sees nothing. The moment some current takes another path back to the source (through a wet hand, through a damaged tool casing to a grounded pipe, through water in a cord connector) the two currents no longer match. The coil senses the difference and a solenoid opens both conductors.
A GFCI does not know what the load is. It does not measure voltage and it does not care how much current is flowing in total. It compares out against back, and nothing else.
4 to 6 milliamps, in tens of milliseconds
In North America the device is built to UL 943. A Class A GFCI must trip when the imbalance reaches 6 mA and must not trip below 4 mA. The level was chosen around the current at which a person can no longer let go of a live conductor. That "let-go" threshold is usually given as about 10 mA for adults, and the standard sits a safety margin below it. Trip time depends on the size of the fault: UL 943 allows several seconds at 6 mA and demands roughly 25 ms at high fault currents, fast enough that the shock is felt but the heart is not stopped.
Older Class B devices trip at 20 mA. They were made for swimming-pool lighting installed before 1965 and you will rarely see one for sale now. Equipment ground-fault protection (GFPE) at 30 mA exists to keep faulty wiring from starting a fire. It is not personnel protection and should not be sold as such.
What a GFCI is not
It is not a fuse or a circuit breaker. A heater drawing 20 A through a 15 A cord returns every milliamp on the neutral, so the GFCI sees a balanced circuit and does nothing. A short between hot and neutral is balanced too. The breaker in the panel handles both of those. A GFCI cord sits downstream of an ordinary breaker for exactly this reason: the two protect against different faults.
It is also not an arc-fault interrupter (AFCI), which listens for the electrical signature of arcing in damaged wiring, and it is not a surge protector.
What is protected, and what is not
Everything downstream of the sensing coil is protected. Nothing upstream is. On a GFCI power cord the device sits in the plug head or in a module partway along the cord, so the cord beyond it and whatever is plugged into the end are covered. The wall outlet and the building wiring are not. On a GFCI receptacle wired into a wall, the outlets downstream on the LOAD terminals are covered as well. Guide 4, on where the protection sits, goes through the choices on a cord.
The two buttons
TEST deliberately leaks a few milliamps around the sensing coil through a resistor, creating an imbalance the device should catch. If it trips, the electronics and the solenoid work. If it does not, the device has failed and must be replaced. A GFCI that will not trip on TEST protects nothing, however new it looks. RESET closes the contacts again.
Since the 2015 edition of UL 943, GFCI receptacles have had to test themselves automatically and lock out or indicate when they fail. Cord-mounted devices follow their own listing categories, and in the field the button test is still the check that matters. Test monthly. Test any GFCI cord that has been dropped, soaked or stored outside before you trust it. Guide 6 covers how to test one properly.
Where the code asks for one
In the United States, NEC Article 210.8 lists the receptacle locations that need GFCI protection: kitchens, bathrooms, garages, outdoors, near sinks, laundry areas, basements, and more with each edition. On job sites, OSHA 29 CFR 1926.404(b)(1) requires either GFCI protection or an assured equipment grounding conductor program for temporary power. A GFCI power cord is the portable way to meet those rules when the outlet itself is not protected, and the only way when the outlet belongs to someone else.
Does it need a ground?
No. A GFCI compares hot against neutral, and a fault through a person to earth shows up as an imbalance whether or not the plug has a ground pin. That is why the code allows a GFCI to protect an old two-wire circuit. The equipment still has no ground, so a fault to a metal casing will not trip anything until someone touches it; the GFCI then trips before harm is done. Better to have both, but the GFCI works alone.
Next: GFCI vs RCD.