A "GFCI" is a ground fault circuit interrupter. These
are inexpensive outlets when they are PROPERLY installed prevent over 200
electrocutions each year. The problem is we find them wired incorrectly several
times a week.

The 'TEST" button is confusing if they are installed wrong. Today, I
found one with the positive and negative connections backwards, (the test button
still works) and more commonly we find them connected without a ground
especially in older homes (again the test button still works). While it is technically
legal to install without a ground, most electricians prefer not to install a
grounded-type "three prong" outlet in an ungrounded situation. Once
the outlet is installed, there is no way for anyone to know if the outlet is
really grounded or not without testing it. There is a hidden shock hazard
should an appliance or tool that needs grounding is plugged into this outlet.
We recommend that you buy a cheap tester like we have, without it, you have no way to assure it is properly installed. Read
more about the importance of GFCIs here
You can find these testers at your local hardware store on online
for less the $10

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Though a GFI will activate if a grounded appliance develops an electrical
short circuit to ground... such as when YOU touch a metal saw and become the
path to ground... you will experience a momentary electrical shock. This
could be a minor tingle or could be more catastrophic, especially if you
are on a ladder or roof. This excerpt is from an OSHA (Occupational Safety
and Health Administration) article on wiring in nursing homes and the dangers to
employees working with ungrounded outlets...
"The ground-fault circuit interrupter, on the other hand, is a
fast-acting device which senses small current leakage to ground and, in a
fraction of a second, shuts off the electricity and interrupts its faulty flow
to ground. The rapid response of the GFCI is fast enough to prevent
electrocution and this protection is independent of the condition of the
grounding conductor.
A GFCI can prevent an electrocution; however, it cannot by itself
prevent an initial electric shock to an employee before it interrupts the
circuit. This initial shock could lead to injuries of an indirect or secondary
nature in which involuntary muscular reaction could cause bruises, bone
fractures, and even death resulting from collisions or falls. Therefore, GFCIs
are in addition to, and not in lieu of, equipment grounding conductor
requirements."
(Here is a link to the complete article:
http://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=FEDERAL_REGISTER&p_id=13346
)
Are there any situations where a GFI will not protect me
from a dangerous shock?
GFI's are not effective in certain circumstances. As
mentioned earlier, they work by measuring the difference between the electrical
current going INTO an appliance and the current going OUT of the appliance.
This assumes that the person being shocked is grounded. If you were
ungrounded and touched the hot and neutral wires at the same time, there would
be no drop in current detected, so the GFI would not activate. Then, you
would be at the mercy of the fuses or circuit breakers, which may or may not
stop the current before its too late!
A second situation where a GFI will not protect you is when a
second, unprotected circuit is involved in an accident. This can happen
when a wire is accidentally drilled into or a metal screw penetrates a wire
hidden in the wall. Unless this second circuit is also protected, you are
at full risk of electrocution, even if the tool itself is on a protected
circuit!
Source: http://www.naturalhandyman.com/iip/infelectrical/infgfi.html#7