I've come across this diagram: 
Notice the connection between ground and neutral at the distribution box. Is that indeed how things are usually wired? If so, why does all current return to the distribution transformer and not into ground?
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3 Answers
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The wiring can vary in different countries, but that looks perfectly normal.
Current can't just go to ground and disappear. Think of the Earth as a very big spherical conductor. If any current does go through the ground, it will end up at the earth electrode of the supplier's transformer. So the Earth is just an alternative path in parallel with the neutral conductor.
In practice, copper is a better conductor than dirt, so most current goes through the neutral.
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10\$\begingroup\$ This is a correct answer. I'd like to add that if you took the ground connections out of the system, then the Live and Neutral wires would start to "float", i.e. take on some arbitrary voltage relative to everything in your house. This can build up to thousands of volts, and eventually exceed the rated insulation value, causing an arc, even through the handle of an appliance you touch. By grounding the neutral, you keep the entire system from floating away from a reasonable voltage level relative to the house itself and the people in it. \$\endgroup\$– user68367Commented Oct 9, 2017 at 23:09
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2\$\begingroup\$ Also, we ground the electrical boxes and some of the cases of the appliances in the house, so if a live wire comes loose inside the appliance/box, and touches the enclosure, due to neutral and ground being connected at the electrical panel, we get a direct short which trips the breaker. Better than having a live enclosure waiting for someone to come along and touch it. Ground fault detection takes this further and measures the difference in current between the live and neutral wires, and trips if > 5 mA. It's assumed the excess current is going to ground through something else (like you). \$\endgroup\$– user68367Commented Oct 9, 2017 at 23:15
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The Earth is a relatively poor conductor. That makes it inefficient to use as part of a circuit. Also, as a poor conductor, any current flowing through it will create a voltage differential. This can be a bad thing if the voltage is high enough and a better conducting path is available (like your body).
There is a reason people are warned to stay away from downed power lines. They can be live and applying high voltage to whatever they are touching. If it is the ground, yes, there is a current path back to a transformer somewhere, and there is a voltage gradient around the point where the wire is in contact with the ground, and your body will be a lower-resistance path. Since this is neither a safe nor efficient situation, it's best not to deliberately use the ground as part of a power circuit.
So, the connection to the power company always includes conductors to allow for the flow of current to be balanced in some fashion using only the wires, never the ground. Ground connections are a sort of fail-safe or safety measure only, never expected to carry any current when things are connected and operating correctly.
There is a device called a ground fault circuit interruptor. This safety device compares the current flowing in the "hot" and neutral wires. They should always be equal (and opposite), meaning that all of the supply current is returning through the neutral, and none is returning by any other path. If there is even a tiny difference, the device trips and shuts off the power. The case where such a device would trip would be if current is flowing via ground, potentially harming someone. These devices are designed on the premise that the ground should never be used as a path in a power circuit.
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In the US we use a split-phase system. The neutral and ground(earth) are in-between the two sides of a 240V AC system. All the current returns, to the power company, through those lines, not the neutral or the ground(earth).
Being A/C, any current 'pushed' into the neutral or ground, is 'sucked' back out again on the second half of the cycle.
answered Oct 9, 2017 at 21:33
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2\$\begingroup\$ (1) "All the current returns, to the power company, through those lines, not the neutral or the ground(earth)." This is true only if the line currents are perfectly balanced. Usually they are not. (2) "... any current 'pushed' into the neutral or ground, is 'sucked' back out again on the second half of the cycle." It is not clear what you mean by this but current flowing in and out of ground is alternating current and not something that is of no consequence as suggested by your answer. \$\endgroup\$ Commented Oct 9, 2017 at 21:53
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\$\begingroup\$ @Transistor: You are correct on the first count, and I agree with your assessment on the second. I was trying (poorly) to demonstrate that the current is not 'lost' as that is what I thought the OP was confused about. Should I delete my answer? \$\endgroup\$ Commented Oct 10, 2017 at 0:24