In your standard household outlet, there is a wire that brings the electricity, which is called the hot wire. There is another wire, called the neutral wire, that allows the electric current to flow back to the ground. Yes, if you follow it far enough, this wire does attach to a rod that extends into the soil or ground. Then the third opportunity to carry electricity is called the "ground". It is either a bare wire or it is a metal wrapping for the other two wires. The metal wrapping is called sheathing. Which ever type of ground it is, it goes all the way to the same rod down in the ground. It usually doesn't carry electricity. It's sole purpose is to carry electricity during an emergency back to the ground. That's why this one is called the "ground".
How does this arrangement provide electrical safety?
Let's say a hot wire becomes loose at some metal electrical box, such as at an outlet box, a switch box, or at a junction box, where several wires meet and are connected. This box, like every metal box in the system, should be connected to the ground system. This is why we say the metal box is "grounded". If the hot wire touches the box which is grounded, the electricity will be able to flow with no resistance. This is called a "short circuit" and often will result in more electricity flowing than the wires are supposed to permit. The wires may become very hot. If the box can be shaken by vibrations in the house (munchkins on the floors), then sparks may fly where the hot wire touches the box. Either one of these occurances could potentially start a fire. Also, if you were to touch the box, you could recieve an electrical shock. To prevent these bad things, a special kind of switch called a circuit breaker or fuse will "trip" or "blow" and no electricity will flow to the circuit. The circuit breaker or fuse stops the flow of electricity before it enters the hot wire, so you can't get a shock from the box and the connection can't create sparks that could start a fire.
This is one reason why you should investigate to discover why a circuit breaker has tripped or a fuse has blown before, or immediately after, you turn the circuit breaker back on or replace the fuse. If you're not sure why a circuit breaker tripped or a fuse has blown, then turn the circuit breaker back off, or remove the fuse, and get professional help.